Turkish President Recep Tayyip Erdoğan on Monday ruled out interest rate hikes for his country’s ailing economy, doubling down on his unorthodox policy of keeping borrowing costs low, despite soaring inflation.
What Turkey needs is “not a rate hike, but an increase in investment, employment, production, exports and current account surplus,’’ BirGün newspaper cited the Turkish president as saying following a cabinet meeting.
The Turkish leader’s remarks arrive days after a surprise rate cut by the central bank despite a 24-year high inflation of almost 80 percent. The move, met by shock by economists, caused the Turkish currency to decline about 1 percent against the dollar before paring losses.
“Our country has created its own path and is walking on it with determination,’’ Erdoğan said, adding that Turkey’s inflation was triggered by imbalanced pricing due to global developments and not budgetary issues or unemployment.
Erdoğan has long maintained that cheaper borrowing costs can slow inflation instead of pushing it higher and has sought to turbocharge growth by focusing on exports and employment as part of his “new economic model.”
Turkey’s central bank has rolled out macroprudential measures that helped slow loan growth momentum in July, a plan that relies on backdoor interventions and the introduction of state-backed accounts shieling savers from a weakening lira, which lost around a quarter of its value against the U.S. dollar this year, after weakening 44 percent against the greenback in 2021.
“Of course it is upsetting that our inflation figures remain nominally very high,’’ he said. “We are taking precautions to stave off the negative effects of inflation figures on the lives our population…”
Over 53 percent of people in Turkey are unable to meet their daily expenses, with 69.3 percent struggling to pay for food, according to a survey published earlier this month by Istanbul-based Yöneylem Social Research Centre.
Erdoğan vowed that his government would not abandon its budgetary discipline, which was in line with data pertaining to “growth, employment, exports” among other factors.