WHEN INFLATION in your country hovers near 20%, then spikes to 36% in a month, alarm bells should be going off at the central bank. Not so at Turkey’s, where the preferred course of action has been inaction. On January 20th, weeks after the consumer price data was published, the bank’s monetary-policy committee kept the main interest rate unchanged, at 14%. Turkey’s president,, who increasingly runs the bank like a government agency, has pledged not to raise rates again.
Conventional economics dictates that the way to bring down inflation is to increase rates. This makes borrowing dearer,and curtailing spending and investment. Mr Erdogan, however, believes that high rates are not a remedy for inflation, but its cause. “Interest rates are the reason,” he likes to say, “and inflation is the result.” This is enough to make an economist’s hair stand on end.
Some of Mr Erdogan’s advisers have referred to a theory called neo-Fisherism to show that their boss’s views are grounded in economics. An equation named after Irving Fisher, an early 20th century American economist, defines the real interest rate as the nominal interest set by the central bank, adjusted for inflation. Assuming the real interest rate is determined by economic fundamentals that are fixed, then the equation appears to say that higher nominal rates must lead to higher inflation.
Mr Erdogan himself has never brought up the neo-Fisherites. In fact, it is only recently that he has offered any clue as to what shapes his thinking on interest. This seems to be not research, but religion. “As a Muslim, I’ll continue to do what is required by nas,” Mr Erdogan said last December, referring to Islamic teachings, which forbid the receiving or charging of interest.
The most likely explanation is that Mr Erdogan has come up with his theory more or less on his own. Yet the best way to judge it is not by its roots, but by its results. These have been dismal. Mr Erdogan’s rate cuts caused the Turkish lira to plunge by 44% against the dollar last year and inflation to reach its highest level in two decades.. Instead of an emergency rate rise that could prevent hyperinflation and offer the currency some breathing room, new rate cuts seem to be in the pipeline.
It's a vape mod ? Yes seems to be in a pipeline , but it's not
because they know the raising rates wont stop the inevitible end instead he wants to get it done quick by lowering rates
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