President Recep Tayyip Erdoğan said Monday that a tight interest rate policy will not lower inflation and vowed that Turkey will succeed in its “economic war of independence”.
After the cabinet meeting, Erdoğan said he prefers a competitive exchange rate because it entails higher investment and employment.
“I reject policies that will shrink our country, weaken it and condemn our people to unemployment, hunger and poverty,” he noted.
The president emphasized that the government is determined to “do the right thing for our country” with economic policies that he says focus on investment, production, employment and exports, rather than the “vicious circle of high interest rates and low exchange rates” . .”
Last Thursday, the country’s central bank cut its key rate by 100 basis points to 15%, signaling more easing before the end of the year. The Central Bank of the Republic of Turkey (CBRT) has cut interest rates by 400 basis points since September.
As a result of the cut, the value of the dollar rose against the Turkish lira. The lira traded at 11:40 a.m. to the dollar at 5:00 p.m. GMT.
Erdoğan blamed the weakness of the lira on games he said were played on foreign exchange and interest rates.
“We see that the games are played on the exchange rate and interest rates. We came out of every battle we entered with honor by taking a strong stand. With the help of Allah and the support of our nation, we will emerge victorious from this economic war of independence,” he said.
Erdoğan supported the view that lower interest rates are the only way to curb inflation. He has called for incentives to boost exports, investment and jobs.
The president also reaffirmed the government’s determination to tackle “opportunists” who push exorbitant price increases by trying to take advantage of the “rise in exchange rates, which has no logical explanation, as an excuse.”
Amid stubbornly high prices, the government has blamed supermarkets and opened investigations into possible exploitative prices.
According to official data, annual inflation rose to 19.89% yoy in October, driven by food, services, housing and transport prices, partly as a result of rising world energy prices.
The central bank says inflationary pressures are temporary but likely to last through mid-2022.
‘Exchange rate competitiveness’
“There are, of course, economic problems that result in rising inflation or price increases,” Erdoğan said. “The equilibrium is upset because there will be no investment when there is inflation, which refers to a steady rise in prices, and production will decline and employment will fall.”
He underlined that the price increases for certain goods resulting from the increase in exchange rates have no impact on investment, production and employment.
On the contrary, he emphasized that “the competitiveness of the exchange rate leads to an increase in investment, production and employment.”
“This is exactly the situation in our country.”