Turkey’s government expects the central bank to implement a balanced monetary policy in which investors are not overwhelmed by high interest rates, said Fahrettin Altun, President Recep Tayyip Erdoğan’s communications director.
The new economic reform process of the Turkish authorities, announced earlier this month, will focus on structural reforms, employment, the fight against inflation and exports, Altun said in an interview with the Daily Sabah newspaper published on Monday.
“We will continue structural reforms. The central bank will continue to give the necessary confidence to the money market in this period while a more balanced and rational monetary policy is expected in which investors are not overwhelmed by interest, as the president said,” Altun said.
Turkey’s central bank raised its benchmark interest rate by 4.75 percentage points to 15 percent last week to help defend the lira, which has sunk to successive record lows against the dollar this year, and to rein in inflation of 11.9 percent. Erdoğan hired former finance minister Naci Ağbal as the bank’s governor on Nov. 7, replacing Murat Uysal, and has repeated his opposition to high interest rates in the days following the appointment.
“The fight against inflation will be an important means in this process. Besides this, increasing foreign trade exports are among our most vital targets,” Altun said.
Altun also said the government would focus on employment and that steps taken in the field of energy, especially energy exploration in the Black Sea, would unburden the budget and foreign trade volume, according to Daily Sabah.
The Turkish lira slid to a record low of 8.58 per dollar on Nov. 6. It rallied to as high as 7.50 against the U.S. currency on Nov. 19 but has shed some of those gains since. It traded little changed at 7.8776 per dollar on Tuesday. Losses this year total almost 25 percent.
Investors have questioned how much free rein Erdoğan will give the central bank to raise interest rates further if needed, pointing to his long-held opposition to higher borrowing costs and his pro-growth economic policies. The president has maintained that higher interest rates are inflationary, a view that jars with conventional economic thinking.