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.
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