Did Erdogan win the war on the "lobby" of interest?

Turkish President Recep Tayyip Erdoğan and the Turkish Central Bank have fought hard in recent years, including the dismissal of Erdogan, chairman of the central bank, Murad Gintinkaya, and the appointment of his deputy, Murad Oisal, instead of trying to encourage borrowing and consumption. The economic growth of the country, while some Turkish economic circles saw a risk.

The enemy of interest
On more than one occasion – during the last period – Erdogan has sharply criticized the Turkish banks: they are making unfair profits because of high interest rates, despite the country's multiple economic difficulties, considering that the banking system is governed by the so-called "interest rate lobby".

Therefore, his recent decision to dismiss the governor of the central bank, who has repeatedly refused to reduce interest rates for good economic reasons; lowering the price due to high inflation and the pressure on the foreign exchange market could threaten the price of the lira and cause savers to hold foreign exchange and sell the local currency, which poses a direct threat to the currency. Turkish economy.

At the first meeting of the central bank led by his new boss, the bank decided to reduce interest rates for the first time in almost five years, or 425 basis points (4.25%), in order to lower interest rates from 24% to 19.75%.

The headquarters and history of the government's labor bank in the capital Ankara (Al Jazeera)

Contrary to the expectations of politicians and economists, Turkish markets have quietly accepted the decision to reduce interest rates and no disruption has occurred, despite the strong alarms of recent weeks that a reduction in rates of interest would lead to a further collapse in the value of the Turkish currency and the stock market.

Erdogan considers high interest rates as "the curse of evil and evil" and has committed more than once to fight them to fight against inflation, to encourage projects to develop. Investment and development in the country, cornerstone of the governments of justice and development for 17 years.

The Turkish President is leaving only an opportunity and warns against the risks of high interest rates on the economy.He presents himself as an "enemy of interest rates" and s & rsquo; Clearly and openly raise interest on bank loans.

"If you are trying to make loans with such high profits, there is no doubt that investments will be blocked and stopped, we have reduced interest rates and inflation has gone down," he said. -he declares. Earlier, he warned that defending high interest rates was a "betrayal".

Benefits of reducing interest
Professor of Political Economy of the University "Najmuddin Erbakan", Gokhan Bozbash, said that President Erdogan's membership in the reduction of interest rates reflected the desire to stimulate the economy. 39, economy in Turkey, while the former president of the Central Bank could raise the rate of inflation, So tends to raise the interest rate to maintain inflation on the one hand, protect the pound sterling against the hard currency for which Turkey buys its fuel requirements from each other and encourage the sale of Turkish central bonds.

Exchange shop in the capital Ankara (Al Jazeera)

"The reduction in interest rates will bring the Turkish economy to several goals, including encouraging investment that creates new jobs by offering cheap loans at lower cost, especially to businessmen. and investors, "Bozbash told Al Jazeera Net.

"The reduction of interest rates encourages more SMEs and thus reduces the problem of unemployment, and the reduction encourages young people to borrow from banks at lower cost."

He pointed out that the reduction in the interest rate was contributing to the reduction of prices of goods and services, which have increased in recent months due to the lowering of the Turkish lira exchange rate and, especially, the reduction the burden of public debt, with governments being the largest borrowers from banks.

Brosbash pointed out that the continuation of Erdogan's interest rate cuts was understandable and justified, but that banks also had their own interest rate setting mechanisms, which were only 39, an intermediary who received the depositors' money and took over the loans, in the form of project financing and cash loans. Loans must be preceded by a direct reduction of interest on deposits.

Economists have stated that there is a conflict in all countries of the world between the economic and financial policies pursued by governments and the monetary policy managed by central banks.

Pakistan's financial and economic policies are mainly focused on implementing political plans by which governments seek to satisfy public opinion by reducing the prices of goods and services and appeasing investors by lowering rates of interest. # 39; s interest.

Experts pointed out that monetary policy needs to take into account certain factors to determine trends and interest rates: the central bank could not lower interest rates and high inflation rates in the markets, would result in an erosion of the national currency and its lack of attraction for investment. And the central banks.