Erdogan hits out at "exploitative" Turkish interest rate policy

By bne IntelliNews February 7, 2017

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.

Related Articles

Creditors of Turk Telekom’s owner Saudi Oger reportedly in talks to sell its 55% stake

Some creditor banks of struggling Saudi construction giant Oger’s Dubai-based unit Oger Telecom are in unofficial talks to sell its 55% stake in Turkey’ largest telecom operator Turk ... more

Ukraine injects another €760mn into nationalised PrivatBank

The Ukrainian authorities have issued domestic government bonds in the amount of UAH22.5bn (€759mn) in exchange for the bank’s shares as part of the additional capitalisation of nationalised ... more

Polish utility Tauron places €500mn eurobond issue

State-controlled Polish power firm Tauron has sold €500mn worth of eurobonds, the company said on July 5. Tauron needs capital to refinance the costs of construction and the purchasing of a ... more