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The interest rate hike is a bitter but necessary remedy for Turkey

Turkish President Recep Tayyip Erdogan considered today, Friday, that the central bank raised the interest rate by 475 basis points yesterday as a bold remedy aimed at reducing inflation, which remains at about 12% for most of the year.

He said, “We realize that we need to take some bitter treatment if necessary. At this stage, I evaluate the decision to raise interest rates yesterday in this context.”

Speaking to business leaders in Istanbul, Erdogan added that he believed that lower inflation would stabilize the currency, and reiterated his conservative economic vision that interest rates were the cause of inflation.

“Our real goal is to reduce inflation to a single digit as soon as possible, and then to the target levels in the medium term, and to ensure that interest rates will decrease in line with this,” he added.

The Turkish central bank raised the main interest rate to 15%, and pledged on Thursday to continue to adopt a tough stance towards inflation, which strengthened the lira under the presidency of the newly appointed Central Bank Governor Naji Iqbal.

The rate hike is the largest in more than two years, and may support the lira after it reached a series of lows since the summer, although it may slow an economic recovery from the repercussions of the Corona virus.

Accelerate investments

Erdogan said – during his participation in the Musiad Expo 2020 in Istanbul – that his government will ensure the acceleration of domestic and foreign investments.

“We are taking steps to consolidate our economic policies and raise the ceiling of our democracy and our freedoms,” he added.

“We are determined to bring Turkey into a new economic and democratic ascendancy phase,” he said. “We will ensure the acceleration of investments to provide lasting results in production and employment by stimulating local and foreign investors.”

“We are ready to move forward with everyone who believes in Turkey’s strength, capabilities and future,” he added, stressing that “our foreign deposits should be returned to Turkey before anything else.”

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