Record 20-Year High in Central Bank's Borrowing Rate
President Recep Tayyip Erdoğan defended low interest rates for many years, saying "Interest is the cause, inflation is the result." However, in Turkey, which is trying to return to the "rational ground" in the economy, interest rates have risen to record levels.
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The overnight borrowing interest rate of the Central Bank of the Republic of Turkey (CBRT) has reached its highest level in the last 20 years. CBRT's policy rate also rose to the highest level by far after the successive increases following the presidential elections. Interest expenses have an important place in the budget.
The interest applied by the CBRT to banks that want to borrow overnight or lend money overnight is called "interest applied in overnight transactions". According to economist Mahfi Eğilmez, in this way, the CBRT can affect short-term interest rates, exchange rates and the growth rate of loans in the secondary market. nterest rates gradually decreased, reaching 1.5 percent in December 2010. The overnight lending interest rate, which subsequently followed a fluctuating course, exceeded the 20 percent threshold again after many years in September 2018.
Then, the interest rate followed a fluctuating course and dropped to 7 percent in February 2023, before the presidential elections. However, after the election, with Mehmet Şimşek sitting as the Minister of Treasury and Finance instead of Nureddin Nebati, Turkey decided to return to the "rational ground". After the election, there were consecutive high interest rate increases.
source: euronews