Turkish President Recep Tayyip Erdogan/Bloomberg
The government predicts that inflation will end this year at 12 per cent, while the TCMB’s current base-case scenario is for 13.9 per cent.
Sunday 06, October 2019
Turkish President Recep Tayyip Erdogan signalled that he expects further monetary easing by the central bank even though he has been happy with the pace of interest cuts thus far, reported Bloomberg.
“Interest rates retreated to reasonable levels with the central bank’s appropriate interventions, but I believe that they will fall further,” said Erdogan.
Erdogan remains fixated on lower borrowing costs, which he believes would only curb inflation, but Governor Murat Uysal signalled that the central bank might look to moderate its pace of rate cuts after ‘front-loaded’ monetary easing in July and September 2019.
On Uysal’s watch, Turkiye Cumhuriyet Merkez Bankasi (TCMB) has cut rates by 750 basis points, including a record move in his first month on the job after Erdogan fired his predecessor in July 2019 for not cutting rates fast enough.
Although the president’s remarks show that he has been content with the pace of monetary easing, his suggestion to further cut the benchmark rate, which stands at 16.5 per cent, will likely be considered by Uysal.
After the inflation rate dropped to single digits last week, Turkey’s real interest rate stood at a whopping 724 basis points, among the highest in emerging markets. Economists are already suggesting that policymakers may deliver another 150-200 basis-point rate cut when they next meet this month.
Erdogan also reiterated his unconventional theory about monetary policy that lower rates bring price growth down.