Interest Rate Debates Will Not Stop in 2023.

The Fed signalled that the policy rate would continue to rise until the inflation is brough under control, despite an increase of 50 bps, instead of 75. The Federal Reserve’s rate hike move was followed by a 50-bps increase decision and a statement containing similar messages from the ECB.


However, these decisions have not been good for the stock markets. The upward trends in the world’s major stock markets came to a halt. Cryptocurrencies, which could not recover for a long time, maintained their downward and volatile course.


Everyone pays attention to the statements both from the Fed and the ECB, and these statements are at least as determinative of the interest rate decision itself. As for the interest rate decisions made in Turkey, the CBRT’s statements no longer decisively affects people’s next investment moves since they only attach importance to the decision itself.


“Will Interest Rates Go Down Next Year?”


I do not expect the CBRT to make any changes to rates at this month’s meeting because, the last month’s statement said, “interest rate cuts have ended for this year”. I told some newspapers and television networks, which called me to inquire whether the Central Bank will cut interest rates this month, to correct their news report. Even the news agencies do not read Central Bank press releases. I believe it would be in their favour for them to start reading CBRT statements in the new year.


Some ask, “Is it possible for the CBRT to reduce rates before the elections in 2023 depending on the inflation trend?”. Well, this is not a remote possibility, but if the Central Bank decides to cut rates, it would be making the last year’s mistakes all over again, which would cause inflation to skyrocket again as soon as this decision starts negatively affecting the exchange rates. Therefore, as elections are fast approaching, it would be in everyone’s best interest not to take such an action unless there is a significant decrease in inflation.