Economics
Past Misdeeds Are Coming Back to Haunt the Turkish Central Bank
- High rates squeezing economy as it slides toward recession
- Policy makers increasingly taking their cue from the market
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Past dithering on inflation is hampering the Turkish central bank’s ability to prop up the weakening economy.
While the lira crashed and prices soared over the summer, Governor Murat Cetinkaya and colleagues hesitated until September before finally raising interest rates. The legacy of that delay means the central bank is trying to quell inflation and keep investors on side for fear of unsettling the currency even as Turkey slides toward recession. The result: an economy painfully squeezed by real rates of close to 4 percent that Morgan Stanley estimates are double the level for emerging markets as a whole.