Erdoğan again blasts interest rates as ‘the mother of all evil’

ANKARA

President Recep Tayyip Erdoğan has once again described interest rates as the “mother of all evil,” vowing that Turkey will “emerge victorious in its fight against interest rates” after the June 24 snap elections.

Addressing businesspeople at a ceremony in Ankara on May 11, Erdoğan took aim at “foreign exchange speculators, interest rate lobbies and enemies of Turkey under the guise of credit rating firms.”

“My belief is that interest rates are the mother of all evils. Interest rates are the cause of inflation. Inflation is a result, not a cause. We need to push down interest rates,” he said at the event, organized by the Turkish Union of Chambers and Commodity Exchanges (TOBB).

“If my people say ‘continue on this path’ in the election, I say I will emerge victorious in the fight against this curse of interest rates. We must bring down the interest rates,” Erdoğan said.

The Turkish president has long claimed that high inflation is caused by high interest rates, against conventional wisdom among economists.

The lira weakened as far as 4.3080 against the dollar after Erdoğan’s comments, from a close of 4.2374 on May 10. On May 9, it had hit a record low of 4.3780 before rebounding strongly the following day.

The rebound in the lira on May 10 was mainly driven by news that Erdoğan had held an unscheduled meeting of his economic team to address the sell-off in the lira, which has fallen more than 10 percent against the U.S. dollar this year.

At the meeting, Erdoğan and the economic team agreed “to take measures to ease interest rate pressure and help prop up the lira.”

On May 11, he said recent economic disruptions in Turkey are “due to global conditions” and as long as Turkey “stands strong” it will overcome “global negativity.” 

He criticized the credit rating agencies “for trying to derail the country’s economy.”

“We are not interested in Turkey’s enemies, who are hiding behind currency rate speculators, the interest rate lobby, or credit rating agencies. These are not our concern,” Erdoğan said.

“Turkey grew 7.4 percent last year, making us one of the champions in the world. Despite that, a rating agency claimed something else. Don’t pay any attention,” he said, referring to S&P, which downgraded Turkey’s sovereign credit rating from BB/B with a stable outlook to BB-/B.  

“We are not subscribed to this agency right now. In this vein, it has no authority to evaluate Turkey. This agency cannot rate us,” Erdoğan said, adding that Turkey should aim for “double-digit economic growth” but would “not give up its fiscal discipline.”