President Recep Tayyip Erdoğan on Monday vowed that Turkey would continue lowering interest rates rather than increasing them, in his most explicit remarks that come as inflation soars.
“This government will not hike interest rates, no one should expect this from us. On the contrary, it will continue cutting the rates,” Erdoğan said in a televised address after a Cabinet meeting in capital Ankara.
Erdoğan reiterated his opposition to higher borrowing costs, which he says only makes “the rich richer and the poor poorer.”
The president redoubled his commitment to boosting production, exports and employment with a low-rates policy. He again promised a current account surplus that will eventually steady the Turkish lira and cool inflation.
Fueled by soaring food and energy prices, Turkey’s annual inflation rate rose at a lower-than-expected pace in May but still jumped to a 24-year high of 73.5%.
“A part of the (inflation) problem is that some citizens are insisting on keeping their savings in foreign currencies, the other part is the imported inputs due to increasing production,” Erdoğan said.
He urged households to take advantage of low-rate loans and invest.
“Those who benefit from the exchange rate, interest and inflation triangle do not understand our country’s growth strategy through investment, employment, production and current account surplus,” the president noted.
In a technical sense, Erdoğan said there is an “actual problem of the cost of living, not inflation.”
“Is inflation a problem? Yes, it is a problem. But is this title alone the main cause of Turkey’s problems? It certainly isn’t. If it were, our country would have solved all the problems thanks to the anti-inflation programs implemented countless times in the past,” he explained.
Erdoğan often calls high interest rates the “mother of all evil.”
Higher interest rates make it more expensive for households and businesses to borrow money.
Turkey’s consumer price index has surged since last autumn as the lira weakened after the central bank in September embarked on a 500 basis-point easing cycle.
Prices have been increasing despite tax cuts on basic goods and government subsidies for utility bills to ease the burden on household budgets.
The central bank has held its benchmark interest rate steady at 14% in five meetings this year and said disinflation will start due to other measures, the so-called base effect and an expected end to the Ukraine conflict.
Erdoğan zeroed in on the impacts of Russia’s invasion of Ukraine.
“If there were no clash in the region, people would have been able to feel the concrete benefits of our economic program,” he said.
“Hopefully we will be at this point in the first few months of next year.”
