ISTANBUL — Central Bank Governor Erdem Başçı's briefing to the cabinet on the interest rate was "routine" and failed to convince, said Prime Minister Erdoğan during his weekly speech in Parliament to AK Party deputies. Prime Minister Recep Tayyip Erdoğan has once again hit out at the Central Bank's interest rate, claiming the rate needs to fall to curb inflation.
Following the AK Party's weekly parliamentary group meeting, Erdoğan answered journalists' questions concerning the agenda. Responding to a question about Central Bank Governor Erdem Başçı's presentation at the ministerial cabinet on Monday and interest policies, Erdoğan stated that it was routine work. "I never agree with Başçı's evaluations about the interest rate and his approach.
We already informed him of our opinions," said the prime minister. Erdoğan touched on Başcı's claims that "As the interest rate rises, so does the inflation. The interest rate is cause and inflation is effect."
The prime minister expressed that the monthly inflation rate is declared and because of the high interest rates, the inflation cannot fall, saying, "Inflation has climbed to two-digit numbers. Some suggest that it will fall as of next month.
We will wait and see." "At the moment, market interest rates and the Central Bank's rates differ from one another. This indicates that the interest rate is directly proportionate to inflation. All the others are secondary causes. The primary reason of this is the interest rate. When we came to power, we took over the state's borrowing rate of interest at 63 percent; and the inflation rate was 30 percent then. As we pulled down the interest, the inflation fell too. We reached single-digit numbers both in the interest rate and inflation.
Moreover, at times, the real interest rate was scaled down to zero. If the interest rate had been high then, inflation would have been high accordingly. We decreased the interest rates by 4.60 percent. Last year's Gezi incidents in May and a five-point increase in January exacerbated the interest rates. I hope new steps will be taken."