Erdoğan asks Turks to trust new economic model as lira weakens

President Erdoğan has asked the Turkish people to be patient and trust his government's new economic model amid the lira's collapse.

Duvar English - Reuters

President Recep Tayyip Erdoğan said on Dec. 8 Turkish people should be patient and trust his government's new economic model, under which he has prioritized economic growth driven by low interest rates, as the lira fell 2% towards record lows.

The lira's slide has been driven by aggressive monetary easing which economists and opposition politicians say is reckless. Inflation jumped to a three-year high of 21.3% last month.

Speaking after a cabinet meeting, Erdoğan said price increases in Turkey were being caused by greed and import prices, adding that he would not allow what he called the "major crime" of stockpiling in any institution.

"We are aiming for lasting prosperity, lasting stability. The prices we pay will be justified by the gains we make," he said.

The lira weakened as much as 2.6% to 13.8070 against the dollar before Erdoğan spoke. It traded at 13.73 at 1651 GMT. It has lost 46% of its value to the U.S. currency this year, touching an all-time low of 14.0 last week.

Despite its depleted reserves, the central bank intervened in markets twice last week over what it called unhealthy prices, keeping the lira below 14 to the dollar.

The central bank has cut its policy rate by 400 basis points since September, under pressure from Erdoğan, and is expected to ease policy again this month.

Erdoğan said financial market volatility will eventually stop and that price hikes stemming from rising energy costs will stabilize soon. He called on Turks owning foreign currency to take advantage of his new economic model's opportunities.

Earlier, Turkish media reported Erdoğan repeating his commitment to low interest rates on a flight returning from Doha.

He also told reporters on the flight that he does not recognize European rulings seeking the release of philanthropist Osman Kavala and Kurdish politician Selahattin Demirtaş and will abide by Turkish court rulings on them.

Last week the Council of Europe told Turkey it was preparing "infringement proceedings" over its failure to release Kavala, a move that could lead to Ankara's suspension from the body. It also urged Turkey to release Demirtaş.