Turkish EconMin: Interest rates are higher than they should be.

By bne IntelliNews May 28, 2014

Interest rates in Turkey are higher than they should be, Reuters quoted economy minister Nihat Zeybekci as saying on Wednesday.

High rates do not support growth and employment while they are contributing to cost inflation, Zeybekci argued. The economy minister’s comments came shortly after PM Recep Tayyip Erdogan’s call for a rate cut. Erdogan has recently escalated his criticism of the Central Bank’s policies, saying that its 50bps rate cut last week was insufficient. Erdogan has argued that high interest rates cause high inflation and damage investments. These comments from top government officials raise questions about the Central Bank’s credibility and independence.

Apparently in a bid to save the image of the Bank and to ease mounting concerns, finance minister Mehmet Simsek said on Wednesday that the credibility of the central bank was critical to Turkey and the Bank needed to be supported in its fight against inflation. Inflation will start falling from May, according to Simsek.

TRY has weakened to 2.1094 against USD on Wednesday, the BIST-100 index was up around 1.2% in the first session.

On a separate note, economy minister Zeybekci also said that if the improvement in the current account deficit continued, the deficit would be around USD 40bn at the end of the year.

Related Articles

Erdogan warns Iraqi Kurds will lose “opportunities” if independence vote proceeds

Turkish President Recep Tayyip Erdogan has warned the Iraqi Kurds that it is in their interests to call off their planned September 25 independence referendum because it “may lead to a process that ... more

Armenia may declare protocols on normalising relations with Turkey “null and void” UN told

Addressing the UN General Assembly, Armenian President Serzh Sarkisian on September 19 warned that Yerevan may be set to declare two protocols aimed at normalising relations with Turkey "null and ... more

Russia’s Rosneft mulls Kurdistan-Turkey-Europe gas pipeline

Russia’s Rosneft is exploring the possibility of building a 30bn cubic metre (bcm) pipeline that would from 2020 deliver natural gas supplies from the Iraqi Kurdistan region to Turkey and ... more