Homeeconomy Newsnatural experiment indian economist sandeep sanyal on turkey cutting interest rates amid 80 inflation 14788981.htm

'Natural experiment': Indian economist Sandeep Sanyal on Turkey cutting interest rates amid 80% inflation

'Natural experiment': Indian economist Sandeep Sanyal on Turkey cutting interest rates amid 80% inflation

'Natural experiment': Indian economist Sandeep Sanyal on Turkey cutting interest rates amid 80% inflation
Read Time
3 Min(s) Read
Profile image

By CNBCTV18.com Sept 23, 2022 1:22:36 PM IST (Published)

This is the second month that the Central Bank of the Republic of Turkey has cut interest rates.

Supply shocks, admissive economic policies, global logistics breakdown during the COVID-19 pandemic and the ongoing Russian invasion of Ukraine have collectively fuelled inflation in many countries. To combat the increasing inflationary pressure, central banks around the world have been slowly hiking interest rates. That is, apart from Turkey. The country has announced yet another slash in interest rates even as inflation in the Recep Tayyip Erdogan-led country stood over 80 percent.

Recommended Articles

View All

In light of the continuing unusual economic policy in Turkey, Indian economist and historian Sandeep Sanyal called the situation a ‘natural experiment’. Stating that countries rarely sign up for such experimental policies, Sanyal said that economists should be grateful when they do.
ALSO READ:
“This is what economists call a ‘natural experiment’..... rarely do countries sign up for it. Hence the field of economics should be grateful when they do,” he wrote on the social media platform Twitter.
 
 
While inflation may be a common macroeconomic problem, Turkey's approach is different. This is the second month that the Central Bank of the Republic of Turkey has cut interest rates. Central banks tend to hike borrowing rates during times of inflation to remove excess liquidity from the economy, while lower rates lead to more money being brought into the economy. But the bank’s measures come at a time when Turkey’s President has gone on record dismissing the inflation risk.
“Inflation is not a crippling economic threat. There are currently countries threatened by inflation rates of 8 percent and 9 percent. This rate is 80 percent in our country,” Erdogan said in an interview with PBS earlier in the week. The 80.21 percent inflation rate is the highest that the country has seen in over 24 years. President Erdogan claims that stores are still well stocked while the country will be on track to bring inflation under control after New Year.
President Erdogan’s focus on economic growth comes as general elections loom in the country. Many experts have stated that the authoritarian leader has undermined the independence of the country’s central bank as well as its official statistical institute. The country’s weakened currency has also meant more financial woes for most households.
 
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!