Turkey’s economy minister calls for more interest rate cuts

Turkey’s economy minister called on Tuesday for the central bank to cut interest rates towards levels expected by markets and warned against an upward revision in year-end inflation targets despite higher-than-expected July data.

“Market expectations for the cost of financing at the moment are at a lower level than current interest rates because of the political and economic stability in our country,” Nihat Zeybekci said in a statement.

“It is an absolute necessity ... to ease interest rates towards expectations.”

Prime Minister Tayyip Erdogan, keen to maintain growth ahead of a presidential election on Sunday in which he is the front-runner, has repeatedly called for sharp interest rate cuts, arguing high rates cause high inflation.

Data on Monday showed consumer prices rose 0.45 percent in July, exceeding a 0.15 percent forecast, for an annual increase of 9.32 percent, near double the official 5 percent target and undermining the central bank’s case for further cuts.

The bank, which has a year-end inflation forecast of 7.6 percent, trimmed its main one-week repo rate for a third consecutive month in July.

Zeybekci said the July inflation data pointed to inflation coming out above market expectations, but argued against revising targets.

“We see the possibility of our year-end inflation targets being revised upwards as unacceptable and unfair to Turkey and the political and economic stability which has been achieved,” he said.

He said Turkey’s GDP growth was expected to exceed 4 percent in the second quarter and also surpass a 4 percent target in the year as a whole.