Türkiye will keep interest rates low even after elections that are expected in May and will not reverse course on monetary policy, according to Treasury and Finance Minister Nureddin Nebati.
The minister said the central bank would keep cutting rates as inflation slows and keep them low, contrary to some analyst expectations that President Recep Tayyip Erdoğan may roll back the government’s stimulus program after the vote.
Nebati's remarks came in an interview with Bloomberg News late Wednesday, which was published on Thursday.
The minister said the plan was in line with Türkiye’s new economic model, unveiled in 2021 and aimed at eventually shifting from chronic deficits to a current account surplus and lowering inflation through more robust exports, production, investment and low interest rates.
Last year, the Central Bank of the Republic of Türkiye (CBRT) slashed its benchmark policy rate by 5 percentage points to 9%, citing the signs of economic slowdown. It held the rates steady last month and will hold its next meeting on Feb. 23.
The monetary authority last month signaled rate cuts could be back on the agenda after it removed the forward guidance about “the current level of policy rate being adequate.”
Erdoğan says high rates cause inflation and called for single-digit rates by the end of 2022. He has said the government’s new economic model is expected to yield results in the new year.
A coalition of six Turkish opposition parties has pledged to roll back Erdoğan's economic policies should they win the presidential and parliamentary elections.
Stabilizing price increases at a low level has been the top priority for the government ahead of the upcoming vote, which is seen as the most consequential vote in the centurylong history of the republic.
Erdoğan has said inflation would “quickly slow down” and end this year at about 20%. The annual consumer price index (CPI) eased further in January to almost 58%, official data showed Friday, marking a third straight month of decrease and the lowest level in 11 months.
Erdoğan this week reiterated additional rate cuts, suggesting they would bring down inflation. “At the moment, we have an interest rate of 9%, and we will lower it further,” Erdoğan said, shifting focus to the Monetary Policy Meeting (MPC) set for Feb. 23.
Turkish officials have said consumer inflation would continue to cool and that the Turkish lira would remain stable, enabling a continuation of current policies.
Regarding the policy after the election, Nebati said: “We are entering a much easier period with tourism income rising and food inflation slowing due to the summer.”
"The idea that the president will raise rates is no longer possible," Nebati was quoted as saying. “As long as I am here,” there will be no reversal in Türkiye’s monetary policy, he underscored.
"Our president will not compromise on this," he added.
