Turkish President Recep Tayyip Erdogan on Wednesday defended his “risky but correct” economic policy of low interest rates, as the central bank intervened in mar-kets to prop up the falling lira.
“What we are doing is right. We have made and are making a po-litically risky but correct plan,” Erdogan told ruling party law-makers in a speech to parliament in Ankara.
Under pressure from Erdogan, the central bank has made a se-ries of interest rate cuts since September despite double-digit inflation.
The Turkish leader goes against conventional economic thinking to claim high interest rates cause high inflation, and vowed again to keep the main rate low.
“The world knows how uncom-fortable 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.
Erdogan said Turkey was “fight-ing against the interest rate lobby” and “enemies of produc-tion and employment”.“We have quit the monetary pol-icy based on high interest rates and instead switched into growth strategy based on investments, employment, production and ex-ports,” he added.
“Our country will not return to the system of exploitation … based on high interest rates.”Earlier, the central bank inter-vened to support the embattled lira which has lost nearly 30 per-cent in value against the dollar in a month.
The bank said in a statement it “started to conduct transactions at Borsa Istanbul Derivates Market (VIOP) due to unhealthy price formations in exchange rates.”
The Turkish lira rallied following the announcement, gaining over three percent in value to the dol-lar to reach 13.02.
The lira has lost over 43 percent in value against the dollar since the start of 2021.
Erdogan appeared to dismiss concerns over the exchange rate. “What you call the exchange rate rises today, falls tomorrow. Infla-tion increases today, falls tomor-row.”
The government “understands sincere concerns” over uncer-tainty driven by soaring prices and fluctuations in the currency, he said, adding that they were “carefully monitoring” the situa-tion. —Agencies
