President wants interest rate cut: Erdogan’s urge sends Lira downhill

Tuesday, November 30, 2021

President wants rate cut
Erdogan’s insistence sent Lira downhill

Higher inflation is slowed by higher interest rates, which is what emerging economists learn about in the first semester. Turkish President Erdogan believes it is the exact opposite. When he urged the central bank to cut interest rates further, the lira hit an all-time low.

Turkish President Tayyip Erdogan sent the already weak national currency lira to a record low with further appeals for interest rate cuts. Erdogan told state broadcaster TRT on Tuesday that high inflation is likely to slide if key interest rates are lowered. Turkey should lower the key interest rate and boost investment, employment, production and growth.

Erdogan reiterated his unconventional approachthat higher interest rates pushed up prices. Therefore, key interest rates are likely to decline significantly ahead of the 2023 elections and the uptrend in prices is likely to subside. He does not want to distance himself from this economic model.

Lira went downstairs again. In the markets, a dollar was paid for 14 lira. Turkey’s currency has devalued 45 percent since the beginning of this year. Erdogan is an outspoken opponent of raising interest rates and is pressuring the central bank to lower key interest rates – although inflation has recently risen to around 20 percent. Companies are warning of economic difficulties caused by the collapse of the lira, which is making imports significantly more expensive and thus further driving up inflation.

Erdogan argues against this and sees high interest rates – currently the prime rate in Turkey at 15 percent – ​​as a reason for rising inflation. Erdogan believes that Turkey will see strong economic growth this year. GDP should grow by at least ten percent, hence its optimistic forecast. The main indicators of the Turkish economy are very strong and the country is currently looking forward to long-term investments from abroad.