Turkish President Tayyip Erdogan on Saturday repeated his call for lower interest rates and said the government would take steps to ensure cheaper borrowing costs to promote consumption and economic growth. Erdogan, who has described himself as an "enemy" of interest rates, wants to spur lending to boost a flagging economy. His calls for lower interest rates have sparked concern among international investors, who have sent the lira to a series of record lows.
"Those in the financial sector can sit comfortably... but the real investor is unfortunately experiencing hardship. So I say: 'Drop these rates, brother,'" Erdogan said in an apparent reference to Turkey's central bank. The bank last month raised interest rates for the first time in nearly three years, citing the impact of the falling lira. International investors have said Turkey needs more aggressive rate hikes to combat inflation and put a floor under the currency.
But Erdogan says he wants to encourage investment in the real economy - to boost employment and economic growth - as opposed to higher rates that generate earnings for banks. "Sooner or later we will take some steps for this," he said. Speaking at the opening of a new shopping centre in Istanbul, Erdogan again appealed to Turks to cash in their foreign exchange holdings for gold or lira and said he wanted to use the local currency in trade deals with Russia and China.
"Convert the foreign currency under your pillows to national currency against those who want to topple us. This is national, this is fruitful. Don't worry you won't make a loss here," he said. He also said he had told Russian President Vladimir Putin and Chinese leaders that he wanted to do trade deals with them using the lira and their local currencies.
The lira, which has lost nearly a fifth of its value this year, booked its worst monthly performance since the 2008 financial crisis last month, hammered by a resurgent US dollar and concerns about the widespread crackdown in Turkey following a failed coup on July 15 coup. In response to Erdogan's call, the Istanbul bourse said on Friday it would convert its foreign exchange holdings into lira. The Turkish Deposit Insurance Fund (TMSF) has also decided to do the same, the pro-government Daily Sabah reported on Saturday.
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