Turkish President Recep Tayyip Erdogan on February 7 described interest rate policy in Turkey as "an instrument of exploitation" as he renewed calls for lenders to provide cheaper loans to boost economic activity.
Following his comments, the Turkish lira weakened by 0.5% from 3.7141 to the dollar to trade at 3.7333 as of around 1430 local time. After five minutes, however, it had recovered to 3.7259.
“I have a problem with the interest rate policy implemented in my country. In fact, this policy is an instrument of exploitation,” Erdogan said in a public speech in Ankara, urging the central bank and commercial lenders to lower their interest rates.
Erdogan also reiterated his unconventional view that high interest rates cause inflation.
Turkey’s annual consumer price inflation climbed to 9.22% in January, reflecting the impact of the weaker currency on the CPI.
The lira, which lost 17% of its value against the dollar last year, has fallen another 5% since the start of 2017.
Last month, the central bank raised its end-year inflation forecast for 2017 to 8% from its previous estimate of 7.5%.
The bank’s next rate-setting meeting is scheduled for March 16.
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