ANKARA (Reuters) – Turkish President Tayyip Erdogan said on Wednesday his government was determined to bring inflation down to single digits and also set his sights on lowering interest rates to below 10%.
“God willing, by bringing interest rates down to single digits, we will also lessen their burden on the budget,” Erdogan said in a speech to lawmakers from his ruling AK Party in parliament. He has long called for rate cuts.
Erdogan’s shock decision on March 20 to replace a hawkish central bank governor set off a volatile lira sell off, putting more upward pressure on inflation that edged above 16% last month.
The lira was 0.2% weaker at 8.18 against the dollar at 1008 GMT. It has weakened 12% since the ousting of the governor.
The new central bank chief, Sahap Kavcioglu, has as recently as February criticised tight monetary policy, including making the unorthodox claim shared by Erdogan that high interest rates cause inflation.
However, since taking the job, Kavcioglu has told investors and bankers that rates must remain high due to high inflation. Economists expect the bank to leave its key rate unchanged at 19% at its policy meeting on April 15.
The bank hiked the one-week repo rate by a greater-than-expected 200 basis points to 19% on March 18. Two days later, Erdogan sacked Naci Agbal and replaced him with Kavcioglu.
(Reporting by Ece Toksabay and Tuvan Gumrukcu; Writing by Daren Butler; Editing by Jonathan Spicer)