Erdoğan again takes aim at high interest rates, signals new Ankara plan

Hande Fırat – ROME

Turkish President Recep Tayyip Erdoğan has once again taken aim at interest rates, repeating his unorthodox claim that high rates cause high inflation.

“My stance on this is clear: Interest rates are the cause and inflation is the result. We will make no concessions, we will reduce rates,” Erdoğan told reporters on the return journey from an official trip to Italy on Feb. 5.

Amid persistently high inflation rates, he noted that inflation has not declined to single-digits for a long time and suggested that it would not do so “unless the mentality changes.”

Erdoğan criticized the fact that some banks are charging up to 20 percent interest, warning that such expensive credit “discouraged investments and job creation.”

“How could employment conditions improve in these circumstances? There will be no jobs unless there is investment,” he said.

“Recently a bank posted a profit of 6 billion liras. Are we working for the interest rate lobby? Customers who take loans from banks are suffering,” Erdoğan added.

Interest rates have long been a bugbear of the Turkish president, who has repeatedly suggested that an international “interest rate lobby” is working to hold the country back.

Erdoğan said he recently held meetings with government officials to discuss interest rates, adding that there would be “another meeting when officials finalize their studies.”

“The Central Bank, the Banking Regulatory and Supervision Agency [BDDK] and state-owned banks must play an active role in this. We will reduce interest rates and when we do that inflation will fall,” he claimed.

Turkey’s annual inflation eased to 10.4 percent in January, from December’s 11.9 percent, driven by a strong base effect, data from the Turkish Statistics Institute (TÜİK) showed on Feb. 5.

At its latest monetary policy committee meeting on Jan. 18, the Central Bank kept its key rates on hold. The Bank left the repo rate at 8 percent, the overnight borrowing rate at 7.25 percent and the late liquidity window rate at 12.75 percent.