Erdoğan urges central bank to continue interest rate cuts: report

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Turkish President Recep Tayyip Erdoğan urged the central bank on Tuesday to continue slashing interest rates, after it already cut them by 1,000 points since July, saying both rates and inflation would hopefully hit single digits next year, Reuters reported.

Erdoğan, who in July ousted the former central bank chief for not following instructions, was cited by broadcaster NTV as saying rates and inflation were on a path to desired levels “despite all the pressure” and would remain there permanently.

The comments suggest the central bank could push on with cuts into next year, which could again raise questions over its independence while also testing a recent stabilization of the Turkish lira after last year’s currency crisis.

A month ago the bank signaled that its easing cycle was drawing to an end, a message that allayed concerns among investors and economists that government pressure would push it to go too far and risk weakening the lira.

Weeks after taking the reins this summer, new Central Bank Governor Murat Uysal began an aggressive easing cycle in response to a slide in inflation, which hit 8.5 percent last month but is expected to rebound this month.

The bank has cut its policy rate to 14 percent from 24 percent in less than four months, more than investors and economists expected even while the lira has remained relatively stable. The currency is down 8.5 percent this year after shedding nearly 30 percent last year.

Uysal said last month the bank had already “used a significant portion of the space” to ease policy. But Erdoğan said there is more room to run.

“When they hit single digits, the currency and economy in Turkey will be very different. Nobody should have any concerns about this,” Erdoğan said.

Turkish Minute

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