Feb 1, 2023
Erdogan Pledges Rate Cuts in Bid for Pre-Election Economic Boost
(Bloomberg) -- Turkish President Recep Tayyip Erdogan pledged the nation will keep slashing its benchmark interest rates to shore up the economy ahead of a crucial reelection bid this year.
The remarks, which came Wednesday night in an interview with state broadcaster TRT, ramp up the odds that Turkey’s monetary authority reduces its key rate when it convenes on Feb. 23. Erdogan’s comments come less than two weeks after the central bank left the rate unchanged at 9%, injecting uncertainty into the path ahead.
Read: Turkish Rate Cuts Are Back on Agenda as Policy Bias Shifts Again
Such a move would follow last year’s string of rate decreases, which brought the official cost of borrowing down by 500 basis points between August and November. Policy makers in Turkey have pursued a policy that’s defied convention with abrupt easing cycles in 2021 and 2022, even as inflation accelerated to their highest levels under Erdogan’s two decades in power.
The path of monetary policy in recent years have closely followed explicit calls by Erdogan to ensure money is cheap, which he argues — contrary to mainstream economic theory — will stabilize consumer prices. The renewed push for easy policy comes as the Turkish leader seeks to boost economic growth and job creation ahead of presidential and general elections that will likely be held in May.
“There is a direct correlation between interest rates and inflation,” Erdogan said on Wednesday, citing the slowdown in Turkey’s consumer inflation to around 64% in December from a peak of 85.5% as proof that his theory holds true.
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