Maybe they should dollarize too /s
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Turkish central bank raises interest rate to 42.5% to combat high inflation
11–20 of 55 posts
Re: Turkish central bank raises interest rate to 42.5% to combat high inflation
#12Does interest rate resolve in USD or turkish lira? Isn't it a no brainer if its pays in USD to invest, as long as turkish central bank is solvent?
That's why they have restricted it, e.g., https://www.reuters.com/business/finance/turkey-imposes-rest...
Re: Turkish central bank raises interest rate to 42.5% to combat high inflation
#13Does interest rate resolve in USD or turkish lira? Isn't it a no brainer if its pays in USD to invest, as long as turkish central bank is solvent?
Lira.
Re: Turkish central bank raises interest rate to 42.5% to combat high inflation
#14Does interest rate resolve in USD or turkish lira? Isn't it a no brainer if its pays in USD to invest, as long as turkish central bank is solvent?
Lira obviously. There used to be a Lira savings account scheme which was protected against FX risk by the government to encourage savings in Lira but I believe that's no longer offered.
Re: Turkish central bank raises interest rate to 42.5% to combat high inflation
#15My layman understanding: raising interest rates is supposed to slow down businesses from growing as fast. The way businesses often respond is by downsizing the workforce. So then you get inflation that’s still high + high unemployment: not a great recipe. Does anyone with a background in economics have more insight into this?
Stagflation is the name for that, it last happened in my country in the 1970s.
Re: Turkish central bank raises interest rate to 42.5% to combat high inflation
#16My layman understanding: raising interest rates is supposed to slow down businesses from growing as fast. The way businesses often respond is by downsizing the workforce. So then you get inflation that’s still high + high unemployment: not a great recipe. Does anyone with a background in economics have more insight into this?
You're right and it is, for example, captured in the Fed's double mandate of price stability and maximum employment: https://www.stlouisfed.org/in-plain-english/the-fed-and-the-...
Re: Turkish central bank raises interest rate to 42.5% to combat high inflation
#17Rates are too low if you compare with Argentina.
Re: Turkish central bank raises interest rate to 42.5% to combat high inflation
#18So Erdogan finally admitted his economic theories of keeping interest rates low are complete garbage. One would think that after years of causing massive damages to the Turkish economy a president should resign, being proven wrong time and time again.
https://tradingeconomics.com/turkey/interest-rate - set it to 10Y, you'll see it's been up to 25% before.
Re: Turkish central bank raises interest rate to 42.5% to combat high inflation
#19erdonomics at its finest
PS say what you want, it's been more than a year of high inflation and you can't say that it ruined the economy
Re: Turkish central bank raises interest rate to 42.5% to combat high inflation
#20My layman understanding: raising interest rates is supposed to slow down businesses from growing as fast. The way businesses often respond is by downsizing the workforce. So then you get inflation that’s still high + high unemployment: not a great recipe. Does anyone with a background in economics have more insight into this?
In economics, everything affects everything else, so you are trying to solve for the equilibrium. For example, high unemployment (not the only immediate effect) in turn will reduce consumption either directly due to loss of income or anticipation of it.
Traditionally, there is the Phillips Curve which states that unemployment and inflation have inverse relationship. https://en.wikipedia.org/wiki/Phillips_curve