Turkish President Recep Tayyip Erdogan reiterated his support for the central bank’s monetary tightening after it delivered another sizable interest-rate hike last week.
(Bloomberg) — Turkish President Recep Tayyip Erdogan reiterated his support for the central bank’s monetary tightening after it delivered another sizable interest-rate hike last week.
In what’s been a stark departure from Erdogan’s long championing of cheap money, he told reporters that his economic team is “implementing measures of monetary and credit tightening to attain price stability,” according to remarks reported by Sabah newspaper on Tuesday.
“These steps will channel our resources to productive areas and aim to attain high, sustainable and balanced economic growth,” Erdogan was cited as saying by Sabah.
The Turkish leader had already signaled he’s rethinking his long-time view that high interest rates cause rather than cure high inflation. The backing has lent critical support to his new economic team that includes two former Wall Street bankers, Finance Minister Mehmet Simsek and central bank Governor Hafize Gaye Erkan.
Since Erkan’s appointment in June, the central bank more than tripled its key rate to 30%, including a 500 basis-point hike last week. The tightening cycle has taken on more urgency with inflation running at almost 60%.
But even as policymakers break with years of unconventional measures under Erdogan, the lira is still down around 31% against the dollar so far in 2023, one of the worst performers among its peers in emerging markets.
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