The impact of Central Bank policy interest rates on macroeconomic indicators in Türkiye (2014–2024)

Abstract Money markets are among the most influential factors affecting macroeconomic indicators. Central banks manage these markets through various monetary policy instruments, the most significant of which is the interest rate. Since 2018, Turkey has pursued a markedly different monetary policy path, which has drawn diverse reactions from both domestic and international economic authorities. This study examines these responses in chronological order. In economic theory, the relationship between interest rates and inflation has been discussed from various perspectives. The generally accepted view is that raising interest rates reduces inflation, while lowering them increases it. However, Turkey’s recent monetary policy has been shaped by an approach that runs contrary to this conventional understanding. The impact of interest rate policy on exchange rates has been predominantly upward. Rising exchange rates have increased the prices of imported goods, thereby driving up costs. This effect has been particularly pronounced in the fuel market, where Turkey’s high dependency on imports led to price increases of more than 100 percent. Given the widespread reliance on road transportation, higher fuel prices significantly raised transport costs, resulting in severe cost-push inflation. The analysis investigates the relationship between interest rate changes and key macroeconomic indicators such as inflation, foreign trade, economic growth, and GDP. The findings reveal a strong correlation between interest rates and many of these macroeconomic variables.