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Moody’s: ‘Saving in Turkey is not a logical option’

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Moody’s Analytics Economist Lina Barokas says that consumer prices in Turkey are constantly increasing and this situation encourages citizens to bring their consumption forward; He pointed out that since the real interest rate is negative, saving is no longer a logical option.

According to the news of Elif Karaca from the World, Barokas stated that the high inflation in Turkey is ‘not surprising’ due to the global increase in power and commodity prices, adding, “The CBRT remains unresponsive to increasing prices and the 14 percent policy rate is well below the current inflation level. “If inflation cannot be brought under control in Turkey, purchasing power will continue to deteriorate. The real interest rate does not provide a buffer against possible shocks,” he said.

“WHY CAUSES THE VIRTUAL CYCLE”

“Consumer prices are always increasing, and this encourages citizens to bring their consumption forward,” said Barokas, adding:

“Since the real interest rate is negative, saving is not a logical option. This creates a vicious cycle where citizens consume more and there is more upside pressure on prices. The absence of national savings limits the country’s ability to invest in areas that can generate foreign exchange inflows. “

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