President Recep Tayyip Erdoğan has reiterated his call for Türkiye’s central bank to keep lowering its key policy rate to single digits by the year's end.
Erdoğan’s latest call came just two days after the Central Bank of the Republic of Türkiye (CBRT) slashed its benchmark one-week repo rate for the third time in a row in a move that exceeded market forecasts.
The president has repeatedly advocated for the easing cycle and earlier this month said interest rates would continue to be lowered every month “as long as I’m in power.”
The central bank delivered a massive 150 basis-point cut last Thursday that saw its key policy rate falling to 10.5% and signaled a halt in the easing cycle after another similarly hefty cut next month.
The bank cut rates by 1 percentage point each in August and September to revive a cooling economy.
“The interest rate will be cut to single digits,” Erdoğan said in a speech in the eastern province of Malatya on Saturday. “We will save our investors, and citizens from the oppression of interest rates.”
The central bank had embarked on a rate-cutting cycle more than a year ago as it lowered its one-week repo rate by 500 basis points to 14%, where it had left it steady in the first seven months of this year.
Monetary easing is part of the government’s new economic program that seeks to boost growth, investments, employment and exports by lowering borrowing costs, especially for exporters and small and medium-sized companies.
The central bank said it delivered the bigger-than-expected cut because financial conditions need to support the growth momentum in industrial production and the positive trend in employment.
“The (Monetary Policy) Committee evaluated taking a similar step in the following meeting and ending the rate cut cycle,” it said in a statement accompanying its rate decision.
Since the cuts in the last two months, the central bank has taken steps to lessen the gap between the policy rate and banks’ lending rates and to boost Turkish lira deposits.
“The interest rate lobbies have started to collapse. And we are now heading down to single digit in interest rates,” Erdoğan said on Saturday.
“Private sector banks have also started to reduce their interest rates.”
Erdoğan is known for opposing higher borrowing costs, which he says only makes “the rich richer and the poor poorer.”
He calls high interest rates his “biggest enemy” and the “mother of all evil.” He believes lower interest rates would lead to lower inflation.
Higher rates make it more expensive for households and businesses to borrow money.
The government says its economic program prioritizing low borrowing costs would eventually help lower inflation by flipping Türkiye’s chronic current account deficits to a surplus.
Türkiye’s annual inflation topped 83.45% in September, a fresh 24-year high, driven mainly by soaring food and energy prices, which rocketed following Russia’s invasion of Ukraine.
“We will slow down inflation as of next year just as we lowered interest rates,” Erdoğan said on Saturday.