Economist Daron Acemoğlu recently provided his insights on the Central Bank’s interest rate decision, expressing some uncertainty about the actions of state-owned banks in response to the move. Acemoğlu, a prominent figure in the field, assessed the Central Bank’s decision to increase interest rates by a significant 750 basis points, highlighting the importance of this step in tackling inflation.
In a social media post, Acemoğlu noted that the rate hike might mark the beginning of a genuine effort to combat inflation. He characterized the move as a step in the right direction, considering the disappointing 250 basis point increase in July.
However, Acemoğlu remained cautious, raising concerns about whether this decision would be followed through effectively. He remarked, “I think Turkey and its people may be in for challenging times.”
Acemoğlu emphasized that Turkey is at the early stages of implementing the necessary policies to address its economic challenges. He identified four key policy changes that he believes are imperative:
- Interest Rate Hike: Acemoğlu stressed the importance of raising interest rates to control inflation effectively by moving real interest rates above zero. He expressed uncertainty about whether state-owned banks would comply, hinting that alternative rent distribution methods might persist.
- Institutional Reforms: He urged the initiation of a process of institutional reform, beginning with the enhancement of freedom of expression and democratic rights. Simultaneously, Acemoğlu highlighted the significance of structural reforms directly impacting the economy, such as curbing corruption, ending anti-competitive practices, ensuring judicial independence, and facilitating investment.
- Addressing Inefficiency and Technological Lag: Acemoğlu identified inefficiency and technological backwardness as Turkey’s major problems, asserting that these issues require substantial institutional and structural reforms.
- Foreign Resource Inflow: He advocated for foreign resources to support financial improvements in companies and banks, as well as addressing significant spending needs arising from natural disasters.
However, Acemoğlu remained skeptical about the efficient utilization of foreign resources, recalling previous periods where available resources were not put to effective use.
In conclusion, Acemoğlu described the interest rate hike as a positive step but remained cautious about its long-term effectiveness. He expressed concerns about Turkey’s economic outlook, suggesting that challenging times may lie ahead for the nation and its people.
