President Recep Tayyip Erdoğan on Wednesday said there was “no turning back” from the new policy direction he says will release the country from the trap of the exchange rate, inflation and interest rates.
“What we are doing is right. We have made and are making a politically risky but correct plan,” Erdoğan told the ruling Justice and Development Party’s (AK Party) lawmakers in Parliament in the capital Ankara.
Endorsing an economic model based on lower interest rates, Erdoğan has been backing a view that high borrowing costs “destroy” domestic production and make structural inflation permanent by increasing production costs.
The president and other government officials have stressed that while there may be price pain for a while, the monetary stimulus should eventually boost exports, credit, jobs and economic growth. He has been reiterating a view that high borrowing costs cause inflation.
Turkey is “fighting against the interest rate lobby” and “enemies of production and employment,” Erdoğan said on Wednesday.
“Turkey has now abandoned the monetary policy based on high interest rates that caused several developing countries to remain stagnant,” he noted.
“Instead, we have transitioned to a growth strategy aiming for investment, employment, production and exports,” he said. “Interest rates are an evil that makes the rich richer and the poor poorer.”
Since September, the Central Bank of the Republic of Turkey (CBRT) has cut its policy rate by 400 basis points to 15% and is widely expected to lower it again this month. Inflation, on the other hand, neared 20% in October.
The opposition has criticized the policy and called for its reversal.
Erdoğan, a consistent and vocal opponent of high rates, says there is “no turning back.”
“Our country is now at a point that can break this trap, there is no turning back,” he said. “Turkey will not live in a trap of exchange rate, inflation and interest rates.”
“As we have not returned from any path we have entered so far, God willing, we will not return from this path either,” he noted.
Erdoğan reaffirmed that he will never support high interest rates, adding that he understood public concerns over the volatility in exchange rates.
“The world knows how uncomfortable I am with high interest rates. I have never been pro-interest rates. I wasn’t today and I won’t be tomorrow,” he said.
In an interview with public broadcaster TRT on Tuesday evening, Erdoğan noted they would see that “interest rates will fall markedly and hence there will be an improvement in exchange rates before the elections,” referring to the polls set for mid-2023.