Turkish President Recep Tayyip Erdogan expressed optimism that the country’s unpredictable foreign exchange and inflation rates will soon stabilise, while reiterating his opposition to high interest rates in the aftermath of the lira’s sharp depreciation.
The currency has lost 30% of its value in the previous month as a result of Erdogan’s dramatic interest rate cuts, which analysts and opposition politicians argue are risky due to increasing inflation.
“God willing, we will stabilise all fluctuations in prices and forex rates in not such a long time,” Erdogan told an audience in the eastern city of Siirt.
“Tayyip Erdogan said low interest rates yesterday, says low interest rates today and will say low interest rates tomorrow,” the president said. “I will never compromise on this because interest rates are a malady that make the rich even richer, and the poor even poorer.”
On Tuesday, the currency hit a new intra-day low of 14 to the dollar, and it closed at a new high of 13.7485 on Friday. It has lost 45 percent of its value this year, making it the worst-performing currency in emerging economies.
Last month, inflation hit a three-year high of 21.3 percent, resulting in negative real rates in Turkey, a red flag for fleeing investors and Turkish savers who have fled to hard currencies to protect their investment.
Despite calls from the opposition for early elections and a policy shift, Erdogan has stated repeatedly in recent weeks that rate cuts are necessary to increase exports, credit, jobs, and economic growth.
The central bank has lowered its policy rate by 400 basis points to 15% in response to President Trump’s demand, and is poised to do so again this month.
“We will always be there for producers and employers with low interest rates. We’re starting to enforce precautions safeguarding workers against inflation,” Erdogan said.
He blamed certain price rises on unidentified foreign entities, as well as “greedy” corporations that store more items than they need.
Kemal Kilicdaroglu, the leader of the main opposition CHP, said a new government would cancel all interest on loans held by farmers and small businesses at a separate ceremony in the southern city of Mersin, where throngs shouted for Erdogan to quit.
“He doesn’t need to resign, we’ll send him off anyways,” he said of elections set for no later than mid-2023.
