After global crisis, Turkiye's interest rate stayed low because it provides a powerful motivation to spend rather than save. Accordingly, the Turkish economy began growing very fast.In the short-term, this may not matter much, but within a longer period of time, low interest rates punish savers and borrowers. Low interest rate also help increase private sector and household debt levels.
CBRT decided to increase interest rates to catch up quickly with the latest global economic developments. Nowadays people argue that interest rates will continue to fall down until people start borrowing again. However lower interest rates can affect households and private sector; namely they can easily get a loan and Cash flow leeds to high level of consumer expenditures. Besides, it may lead to the creation of a new economic bubble.
As a result interest rate has to stay high until Turkish people and private sector reduce their debts and also risks.
