Fatih Erkan Dogan
23 September 2016•Update: 23 September 2016
ANKARA
The Turkish Central Bank’s rate cut this week was the right move, and more such cuts are an efficient way to boost the economy, President Recep Tayyip Erdogan said on Friday.
"I see the Central Bank's last cut as steady, careful, and balanced. Because it is not right to make sudden moves, up or down, that could create tremors in the economy. But I believe it will be beneficial to continue those cuts steadily," Erdogan told Bloomberg in an interview.
Turkey’s Central Bank on Thursday cut its overnight lending rate, the highest of the multiple rates it uses to set policy, by 25 points following recent reductions in the last six months, in line with expectations.
The steady cuts started just after current Central Bank Governor Murat Cetinkaya took over this April from his predecessor Erdem Basci, whom the government criticized for holding rates too high.
"Now the new administration of the Central Bank, taking into consideration the government’s interest rates policies, have been carrying out cuts since they took office. And I think this is an important signal to investors. My hope is that the other banks will take this signal that the Central Bank has given, heed it, and open the way for investors," Erdogan said.
During the interview, Erdogan reiterated his view that interest rates and inflation are directly correlated, an approach many economists take exception to.
"I don't see inflation as inversely correlated to interest rates. It is exactly the opposite. I see them directly correlated," said Erdogan, stressing he saw this over the last 14 years of Justice and Development Party (AK Party) rule, and that the economic track record of governments he led proved the soundness of his approach.
“You can only talk about development in a country where there’s investment,’’ he said. “But when interest rates are high, investors cannot invest,’’ he added, citing the ultra-low or even negative interest rates used in some of the world’s most advanced economies.
