Speaking at the AKP’s Group Meeting, President Erdogan said he would continue fighting for lower interest rates which is a signal for the central bank ahead of its policy rate decision meeting on Thursday.
Following Erdogan’s comments, Turkish lira weakened reaching 10,53 versus the USD.
The President said “I cannot be on the same path with those who defend interest. We will lift the interest rate burden from citizens,” as he reiterated that high borrowing costs were the cause of inflation.
Erdogan however told reporters that the central bank would decide its policy independently answering accusations of political pressure on policymaking.
Yet, the fact is that the central bank’s 300 basis points rate cut decision that brought the policy rate down to 16% versus the 20% CPI inflation was delivered amidst pressures of Erdogan. Such policy rate cuts fuelled currency weakness hence inflation. Ahead of Erdogan’s speech the central bank was already expected to cut the policy rate by another 100 bp on Thursday to 15% according to the median estimate in a Bloomberg survey of 21 analysts.