Erdoğan hopes volatile Turkish lira will steady soon

President Erdoğan has said that he hoped that volatile foreign exchange and inflation rates would stabilize shortly, as he reiterated his promise to lower interest rates.

Sunday December 05 2021 09:56 am

Duvar English - Reuters

Turkish President Recep Tayyip Erdoğan said on Dec. 4 he hoped that volatile foreign exchange and inflation rates would stabilize shortly and he again promised low interest rates, after a historic plunge in the lira currency to record lows.

The lira shed some 30% over the last month in a selloff driven by aggressive interest rate cuts that Erdoğan sought, but that economists and opposition politicians say are reckless in part due to soaring inflation.

"God willing we will stabilize all fluctuations in prices and forex rates in not such a long time," Erdoğan told an audience in the eastern province of Siirt.

"Tayyip Erdoğan said low interest rates yesterday, says low interest rates today and will say low interest rates tomorrow," the president said. "I will never compromise on this because interest rates are a malady that make the rich even richer, and the poor even poorer."

The currency touched a record intra-day low of 14 to the dollar on Nov. 30 and logged a record close on Dec. 3, at 13.7485. It is by far the worst-performing currency in emerging markets this year after having shed 45% of its value.

Inflation jumped to a three-year high of 21.3% last month, leaving Turkey's real rates deeply negative, a red flag for fleeing investors and for Turkish savers who have flocked to hard currencies to protect their wealth.

Despite opposition calls for early elections and a policy reversal, Erdoğan has repeated in recent weeks that rate cuts are needed to boost exports, credit, jobs and economic growth.

Under pressure from the president, the central bank has slashed its policy rate by 400 basis points to 15% and is expected to ease policy again this month.

"We will always be there for producers and employers with low interest rates. We're starting to enforce precautions safeguarding workers against inflation," Erdoğan said.

He said unspecific foreign actors, as well as "greedy" businesses that stockpile more goods than needed, are in part to blame for some sharp price spikes.

At a separate event in the southern province of Mersin, where crowds called for Erdoğan to resign, main opposition Republican People's Party (CHP) leader Kemal Kılıçdaroğlu said a new government would forgive all interest on loans held by farmers and small businesses.