Erdoğan defends lower interest rates as lira sinks to further all-time low
Turkish President Recep Tayyip Erdoğan on Monday said there was a “game” being played against Turkey by those using interest rates, the lira’s exchange rate and inflation as he defended his stance on lower interest rates to boost economic growth and job creation.
Erdoğan’s remarks sent the lira to a fresh historic low of 11.46 against the dollar, Reuters reported on Monday, following a rebound earlier in the day, prompting analysts point to the need for emergency rate hike.
The Turkish leader vowed to deliver his country out of the “economic war of independence,’’ with victory, T24 news site cited Erdoğan as saying following a cabinet meeting in Ankara.
“We know quite well what we’re doing with the current policy, why we’re doing it, and the kind of risks it entails and what we’ll achieve at the end,” Erdoğan said. “We’re pleased to see that the central bank’s policy rate is being kept low”
Erdoğan’s remarks arrive days after he expedited a market meltdown on Wednesday, when the Turkish leader vowed to continue his battle against interest rates "to the end," causing the lira to further weaken.
The Turkish leader maintains an unorthodox view that higher interest rates are inflationary.
Influenced by Erdoğan’s demand for lower borrowing costs, Turkey’s monetary authority has cut the key rate by 300 basis points to 16 percent in two consecutive moves since September, battering the currency and fuelling inflation, which has accelerated to almost 20 percent.
Erdoğan on Monday vowed to crack down on “unfair, inexplicable price increases” by those using a weak lira as an excuse.
The Turkish president also stressed that the belief that inflation can only slow if the economy contracts has no basis.
"Let nobody have any doubt that the way to increase employment is through investment, production and exportation. This is the reality that the IMF, World Bank, our mandatary economists try to steer at every move (for development) by Turkey,’’ Erdoğan said.
The Turkish lira has plummeted to an unprecedented 35 percent down on the year.