President Recep Tayyip Erdoğan called on citizens to be patient and trust Turkey’s new economic path, reaffirming commitment to low interest rates, which he says will boost investment, jobs, exports and growth.
Erdoğan has repeatedly endorsed an economic model based on lower borrowing costs over the last month, and the government, regulators and banking associations have all embraced the new policy direction.
“We need to move the potential of Turkey forward,” Erdoğan said in a televised address following the Cabinet meeting on Wednesday in the capital Ankara. “We know where we are going, I ask our people to be patient,” he noted, asking the nation to trust the government’s plan and investments.
He called on households owning foreign currency to take advantage of the new economic model’s opportunities.
While there may be price pain for a while, the president and other government officials have stressed that the monetary stimulus should eventually boost exports, credit, jobs and economic growth.
Erdoğan said price increases in Turkey were being caused by greed and import prices, and added that he would not allow what he called the “major crime” of stockpiling in any institution.
“We are aiming for lasting prosperity, lasting stability. The prices we pay will be justified by the gains we make,” he said.
Erdoğan’s remarks come amid high volatility in exchange rates after the country’s central bank slashed its benchmark policy rate by 400 basis points to 15% from 19% since September. It is widely expected to lower it again this month.
On the other hand, annual inflation accelerated to 21.31% last month, the highest reading since November 2018, up from 19.89% in October, according to official data.
The central bank says the inflation pressure is temporary and necessary to expand credit, exports and economic growth.
A consistent and vocal opponent of high borrowing costs, Erdoğan has been reiterating a view that high interest rates cause inflation. He also vowed to fix inflation rapidly and called on citizens not to panic.
“With lower interest rates and stable currency, we will move production and employment forward,” he said.
The opposition has criticized the current policy and called for its reversal.
The Turkish lira touched a record low of 14 to the United States dollar last week amid high volatility that triggered direct central bank intervention, selling dollars.
The lira traded at 13.8050 versus the U.S. currency by 12:09 p.m. GMT, from a close of 13.69 on Wednesday.
The Central Bank of the Republic of Turkey (CBRT) last week intervened in the foreign exchange market twice due to “unhealthy price formations” in exchange rates, keeping the lira below 14 to the greenback.
The bank had last month warned it was observing unhealthy price formations that are “unrealistic and completely detached from economic fundamentals.”
The president said the “competitive force” of the exchange rate leads to increase in investment, production and employment.
He blamed the lira’s weakness on games he said were being played on foreign exchange and interest rates, saying that such scenarios were played in the past only to fail.
Erdoğan on Wednesday said financial market volatility will eventually stop and that price hikes stemming from rising energy costs will stabilize soon.
He also blamed stockpiling for the surge in prices and threatened to impose more severe punishments.
The government “will show no mercy” for individuals that are stockpiling and trying to take advantage of rising prices in goods, the president stressed.
Earlier, Erdoğan repeated his commitment to low interest rates on a flight returning from Doha.
He told reporters on the flight Turkey would reduce inflation and exchange rate volatility through low interest rates.