President Recep Tayyip Erdoğan has said Turkey will soon lower interest rates to single digits and that inflation will follow suit, Bloomberg reported.
“We are lowering and will lower interest rates to single digits in a short period of time,” Erdoğan said in a televised speech on Sunday. “After they fall to single digits, inflation will also slow to single digits.”
The drop in inflation after rate cuts is an apparent reference to Erdoğan’s personal belief that price gains slow when the cost of borrowing is reduced. Most economists think the opposite is true.
Erdoğan’s comments come a day after he said he believes the central bank will lower interest rates when its monetary policy committee meets on Thursday. The president sacked the central bank governor in July for failing to live up to his expectations for rapid cuts to interest rates. The new governor delivered a 425 basis-point cut to the benchmark rate in the first meeting he chaired. The rate now stands at 19.75 percent.
The lira jumped 2.1 percent in the five days through Sept. 6, its first weekly gain since Aug. 9.
Source: Turkish Minute