Turkish President Recep Tayyip Erdogan on Wednesday defended his “risky but correct” economic policy of low interest rates, as the central bank intervened in markets to prop up the falling lira.
“What we are doing is right. We have made and are making a politically risky but correct plan,” Erdogan told ruling party lawmakers in a speech to parliament in Ankara.
Under pressure from Erdogan, the central bank has made a series of interest rate cuts since September despite double-digit inflation.
The Turkish leader goes against conventional economic thinking to claim high interest rates cause high inflation, and vowed again to keep the main rate low.
“The world knows how uncomfortable I am with high interest rates. I have never been pro-interest rates. I wasn’t today and I won’t be tomorrow,” he said.
Erdogan said Turkey was “fighting against the interest rate lobby” and “enemies of production and employment”.
“We have quit the monetary policy based on high interest rates and instead switched into growth strategy based on investments, employment, production and exports,” he added.
“Our country will not return to the system of exploitation … based on high interest rates.”
Earlier, the central bank intervened to support the embattled lira which has lost nearly 30 percent in value against the dollar in a month.
The bank said in a statement it “started to conduct transactions at Borsa Istanbul Derivates Market (VIOP) due to unhealthy price formations in exchange rates.”
The Turkish lira rallied following the announcement, gaining over three percent in value to the dollar to reach 13.02.
The lira has lost over 43 percent in value against the dollar since the start of 2021.
Erdogan appeared to dismiss concerns over the exchange rate. “What you call the exchange rate rises today, falls tomorrow. Inflation increases today, falls tomorrow.”
The government “understands sincere concerns” over uncertainty driven by soaring prices and fluctuations in the currency, he said, adding that they were “carefully monitoring” the situation.
“This is our job,” said Erdogan.
