President Recep Tayyip Erdoğan said interest rates would be further lowered and suggested inflation would fall as a result as he underlined that Turkey’s economic woes would pass.
“We will lower interest rates as we have done already,” Erdoğan told an audience in the northern province of Giresun on Saturday.
The Turkish central bank this month halted a rate-cutting cycle after it had slashed its benchmark policy rate by 500 basis points since September to 14%.
“We are aware of the fact that inflation is a serious burden on citizens, Erdoğan said. “You know of my battle with interest rates. We are lowering interest rates and we will lower them. Know that inflation will fall too then, it will fall more,” he explained.
“The exchange rate will stabilize, and inflation will fall, prices will fall too, all of these are temporary,” he added.
Erdoğan has been reiterating a view that lower interest rates lead to lower inflation. He has also endorsed a new economic path that prioritizes production, exports, employment and low borrowing costs.
The Central Bank of the Republic of Turkey (CBRT) says the strategy will help Turkey’s chronic currency account deficits turn to a surplus, bringing price stability.
The country’s annual inflation surged to a 19-year high of 36.1% in December, driven by last year’s slide in the Turkish lira and rising global commodity prices.
This month, the lira has settled into a tight range of around 13.5 against the United States dollar, after the government took several steps to boost public confidence and official reserves.
Turkey is due to release January inflation data this Thursday, and surveys see it reaching around 47%, which would mark the highest reading in nearly 20 years, on the back of steep price hikes.
Erdoğan on Saturday replaced the head of the statistics agency. Erhan Çetinkaya succeeded Sait Erdal Dinçer as chairperson of the Turkish Statistical Institute (TurkStat), the Official Gazette said, less than a year after his appointment.
Çetinkaya, 40, has been deputy chairperson of the banking watchdog, the Banking Regulation and Supervision Agency (BDDK), since 2019.
Turkey began the year with a series of price hikes in areas ranging from gas and electricity to road tolls and bus fares. The monthly minimum wage was also hiked 50% for 2022.
The median estimate of 17 economists in the Reuters poll for annual inflation in January stood at 46.68%, the highest since April 2002, with forecasts ranging between 40% and 52.19%. The median for the monthly inflation figure was 9.8% in the range of 6.9% and 13.72%.
A median estimate in a Bloomberg survey of 16 analysts sees the reading surging to 48%.
Producer prices have also soared in recent months, with annual inflation standing at 79.89% last month, which economists say also puts upward pressure on consumer prices.
The central bank sees inflation approaching 50% in January and peaking around 55% in May before dropping sharply in the third quarter and ending the year at 23.2%, according to its first quarterly inflation report unveiled last week.
The bank ramped up its year-end annual inflation forecast to 23.2% from a previous 11.8%, and its chief dismissed the notion that a series of rate cuts have sent inflation soaring and the lira declining, stressing the monetary authority sets policy based on data.
The bank also forecast 8.2% inflation for the end of 2023 and a return to its official target of 5% a year later.
As Erdoğan praised the currency stability this month and promised to address the “inflation bubble,” CBRT Governor Şahap Kavcıoğlu said the central bank has made lira a top priority.
Kavcıoğlu on Thursday said that the central bank will support the new economic plan and that price stability will be achieved by increasing the share of the lira in the financial system. He said the bank will review its policy tools and add new instruments in order to prioritize the local currency.
Erdoğan on Saturday vowed Turkey would achieve great success in the economy as it has attained in other areas.
He reiterated the government’s aim to place Turkey among one of the world’s top 10 largest economies.
“We have two areas that are dear to us. The first is to ensure the security of our country and our people. Because without security, everything else is meaningless. The second is the economy. Keeping the economy, people’s livelihood and employment alive, and constantly improving them is our main goal,” Erdoğan said.
He said that his government’s economic program based on investment, employment, production, exports and growth will help achieve this goal.
“Every investment made, every production and service facility opened will continue to bring income to our country and our people for generations,” the president noted.
“Just as we have improved our security, infrastructure, regional and global political power at a level that we can be proud of, I hope we will soon achieve similar successes together with the economy.”