The article draws a parallel between the economic situations in the US under Trump and Turkey under Erdoğan, arguing that political instability in both countries is leading to economic fragility and high inflation. The weakening of institutions is identified as a key factor contributing to this economic instability.
The piece focuses heavily on Turkey's recent economic challenges, specifically highlighting the impact of the arrest of Istanbul Mayor Ekrem İmamoğlu and his team. This event triggered significant market reactions, forcing the Central Bank of the Republic of Turkey (CBRT) to implement emergency rate hikes – a 200 basis points increase initially, followed by a further 350 basis points increase in the subsequent month.
The overarching message is a cautionary tale: the weakening of institutions invariably leads to economic instability and high inflation, as illustrated by the experiences of both the US under Trump and Turkey under Erdoğan.
In both Donald Trump’s America and Recep Tayyip Erdoğan’s Turkey, the message from markets this year is clear: political instability is feeding economic fragility. We should consider ourselves warned: when institutions weaken, inflation is never far behind.
ISTANBUL – Turkey’s financial markets are still reeling from the arrest of Istanbul Mayor Ekrem İmamoğlu and key members of his team on March 19, and the subsequent arrests in the weeks after. Within 24 hours of March 19, the Central Bank of the Republic of Turkey (CBRT) had to raise the upper bound of its policy rate by 200 basis points, only to hike it together with the policy rate by another 350 bps within the next month.
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