Turkish President Erdoğan rails against high interest rates on eve of Central Bank meeting

ISTANBUL - Reuters

AA photo

Turkey’s real interest rate is among the highest in the world and that needs to be changed, President Recep Tayyip Erdoğan said on Nov. 23, taking aim at borrowing costs on the eve of a Central Bank meeting.

In a speech, Erdoğan also said the Central Bank was independent but he reserved the right to criticize it. Following his comments, which were broadcast live on television, the lira sank to a record low of 3.4170 against the dollar.

“Since I took on the job of leading Turkey 14 years ago, I have only fallen short of making headway in a few areas that I desired. One of those is the cutting of interest rates,” he said in a speech at the Istanbul bourse.

“I have nothing against the independence of the Central Bank, but I cannot allow my people’s will and rights to be taken away with high interest rates,” he said.

Twelve of 19 institutions in a Reuters poll expect the Central Bank to hike its main one-week repo rate by 25 basis points to 7.75 percent on Nov. 24.

That would be the first hike since January 2014, when the bank met in an emergency session and raised its main interest rate to 10 percent to stem sharp lira falls.

Turkish growth is likely to miss government forecasts this year and next as uncertainty after a failed coup and an expected spring referendum on constitutional change delay investment decisions, officials told Reuters last week.

Determined to boost growth, Erdoğan - who has previously described himself as an “enemy” of interest rates and declared them a means of “exploitation” - urged the country’s commercial banks to do more to bring down borrowing costs.

“I am calling out to bankers: please pull interest rates to reasonable levels. Look at unemployment, if we want growth we need employment. Unemployment is at 11 percent right now, is this what this country deserves?” he said.