Erdogan urges Turkey's central bank to cut rates

The central bank aggressively raised key rates in January to stem a steep drop in the Turkish lira

Published: Updated:

Turkish Premier Recep Tayyip Erdogan called Friday on the central bank to cut interest rates in order to stimulate the economy as political instability saps momentum.

"The central bank should hold an extraordinary meeting to cut [rates] ... just as they met previously to raise them," Erdogan told a press conference.

The central bank, which is officially independent, aggressively raised key rates in January in a bid to stem a steep drop in Turkey's currency, the lira.

The overnight lending rate is now 12.0 percent, while the borrowing and one-week repo rates are at 8.0 percent and 10.0 percent respectively.

The bank's next monetary policy meeting is scheduled for April 24.

The January hike came amid an escalating crisis for Erdogan sparked by a graft probe targeting his inner circle, months after mass anti-government protests.

Erdogan -- who has made a turnaround in Turkey's economic fortunes a keystone of his 11-year rule -- on Friday again pushed for lower rates to boost credit for consumers and businesses.

"Investors in Turkey will be eager once interest rates are lowered. More investments will be made," he said, adding that "we are doing quite well right now in economic terms".

Erdogan's Islamic-rooted Justice and Development Party (AKP) emerged strong from last Sunday's local polls in an election billed a vote of confidence on the leader sometimes dubbed "the Sultan".

Turkey's economy grew by 4.0 percent last year, official data showed this week, but analysts warn of a slowdown after months of turmoil and ahead of presidential elections in August.

Emerging economy currencies including Turkey's have also taken a beating due in part to the US Federal Reserve's decision to reduce stimulus measures.

Deputy Prime Minister Ali Babacan predicted Friday that Turkey's growth would be confined to the 3-4 percent range unless deep structural reforms are made.

Ratings agency Fitch on Friday affirmed Turkey's credit rating at BBB- with a stable outlook but cut its growth forecast to 2.5 percent from 3.2 percent for this year and to 3.2 percent from 3.8 percent for 2015.

"The economy remains highly volatile," Fitch said in a statement, judging the coherence and predictability of macroeconomic policy to be weaker in Turkey than in some emerging market rating peers.

It also cited political risk in the country despite the AKP's election triumph.

"The AKP defied expectations in local elections on 30 March, capturing over 45 percent of the vote and bolstering Prime Minister Erdogan's hopes of standing as president," it said.

"Nonetheless, Fitch expects political noise to remain an enduring feature of Turkey ahead of presidential elections in August and parliamentary elections in June 2015, periodically clouding the economic outlook."

Top Content Trending