President Recep Tayyip Erdoğan on Thursday reiterated his strong opposition to high interest rates, saying he had advised the central bank to lower its key policy rate further at its upcoming meetings.
The remarks came a day after Erdoğan said he expects the central bank’s monetary policy committee to deliver another cut to its one-week repo rate next month and bring it down to single digits by year-end.
“My biggest battle is against interest. My biggest enemy is interest,” Erdoğan told the general assembly of the Confederation of Turkish Tradesmen and Craftsmen (TESK) on Thursday, also repeating his view that lower rates will lead to lower inflation.
The Central Bank of the Republic of Türkiye (CBRT) surprised markets and unexpectedly lowered the one-week repo rate by 200 basis points in the past two months, lowering it to 12% from 14%, where it had left it steady the previous seven months.
“We lowered the interest rate to 12%. Is that enough? It is not enough. This needs to come down further,” Erdoğan said. “We have discussed, are discussing this with our central bank. I suggested the need for this to come down further in upcoming monetary policy committee meetings.”
On Wednesday, Erdoğan said Türkiye would continue cutting interest rates and not raise them, saying they would come down to single digits by year-end.
“From now on there is no going up, it will fall further. That will also reduce inflation,” he told a televised interview with private broadcaster CNN Türk.
Erdoğan called on households and businesses to take advantage of cheaper loans to make investments, also stressing that Türkiye aims to strengthen the Turkish lira by reducing borrowing costs.
Erdoğan is known for opposing higher borrowing costs, which he says only makes “the rich richer and the poor poorer.” He often calls high-interest rates the “mother of all evil.”
Higher interest rates make it more expensive for households and businesses to borrow money.
The government says inflation will fall with its economic program prioritizing low-interest rates to boost exports, production and investments, aiming to lower the increase in consumer prices by flipping Türkiye’s chronic current account deficits to a surplus.
Türkiye’s annual inflation topped 80% in August, a fresh 24-year high, driven mainly by soaring food and energy prices, which rocketed following Russia’s invasion of Ukraine.
Yet the increase turned out to be smaller than in previous months, signaling that price pressure might be slowing.
Erdoğan last week said inflation was not an “insurmountable economic threat,” adding it will begin to fall at the end of the year and drop to “reasonable” levels as of February 2023.
“We have a battle against inflation, and I believe that as of the new year, this inflation will come down with low interest rates,” Erdoğan said on Thursday.