President Recep Tayyip Erdoğan said Turkey will reduce inflation and exchange rate volatility through low interest rates, after the lira plunged to record lows over the central bank's aggressive easing policy demanded by the president.
Erdoğan repeated his opposition to high interest rates, adding that Turkey's forex reserves were not an issue despite the central bank's market interventions last week.
The president spoke to Turkish journalists during a visit to Qatar on Dec. 7 as the central bank, which has slashed borrowing costs by 400 basis points to 15% since September, prepares for the last rate-setting meeting of the year on Dec. 16.
Facing falling support in opinion polls ahead of 2023 elections, Erdoğan has embarked on a full-throttle push to expand the economy and create jobs by demanding the central bank reduce borrowing costs. His strategy has battered the currency, which lost more than 45% of its value to the dollar so far this year.
“We certainly don’t believe in high interest rates. We will pull down inflation and exchange rates with low-rate policy,” Bloomberg cited Erdoğan as saying. “High rates make the rich richer, the poor poorer. We won’t let that happen.”
Erdoğan said his government aims to support investments through low rates which he said will lead to higher production, exports and jobs. “Growth will follow,” he said.
The president signaled potential swap deals between the Turkish central bank and “many other central banks.”
Erdoğan also dismissed criticism from opposition parties that the central bank’s reserves had been depleted in supporting the lira.
“Turkey doesn’t have a serious FX reserve issue and we will continue to build FX reserves,” he said.
He also blamed stockpiling for the surge in prices and threatened to impose more severe punishments.
"I believe we will reverse these attacks on the currency. As I always say, God willing this will also pass us by. Let everyone know this," he said.