ANKARA, March 28 — Turkish President Tayyip Erdogan said today the central bank must cut interest rates or inflation will remain high, and he blamed the recent volatility in the lira on “attacks” by the United States and other Western countries.
The Turkish currency dived 5 per cent against the dollar today after banks started providing lira liquidity to the London market again following several days of authorities withholding liquidity to support the currency.
The lira has come under renewed pressure recently over concerns about Turkey’s balance of payments, its ability to service its foreign debt, and repeated calls from Erdogan, who has described himself as an “enemy of interest rates”, for the central bank to cut rates.
Speaking to young voters in Ankara ahead of local elections on Sunday, Erdogan said Turkey had thwarted the attacks by the United States and the West on the lira and added that some banks were playing a game on the currency ahead of the vote. He did not name the banks.
“They can’t find lira now, they are struggling in terms of payments. The tables have turned. While they can’t do this, the lira firms and dollar falls,” Erdogan said.
Instead, however, the lira weakened as far as 5.6465 per dollar today from 5.33 yesterday. Last year, it plunged almost 30 per cent against the dollar. As of 1152 GMT, it had clawed back some of its losses to 5.5861.
“Banks playing this international game have started saying they won’t publish reports in election times. Publish it, what’s that going to change?” Erdogan said. “We must discipline the speculators in the market.”
Turkish financial regulators opened investigations into JP Morgan and other banks at the weekend, accusing them of providing misinformation in reports that stoked volatility in the lira.
The country head to polls on Sunday to vote in municipal elections that Erdogan has described as a “matter of survival” for Turkey, as the economy has taken a nosedive.
Inflation, which has been in double digits since 2017, rose to nearly 25 per cent last year. In February it stood at just under 20 per cent.
Erdogan, whose unorthodox economic views have unnerved investors, said today that inflation would fall as interest rates were cut.
“The main issue is interest rates. As interest rates are brought down, inflation will fall,” Erdogan said.
“The real problem is interest rates. I’m also an economist,” he added. — Reuters
