Erdoğan says central bank will cut interest rates, helping to slow inflation

Turkish President Recep Tayyip Erdoğan said the central bank will cut interest rates at a meeting next week, helping to slow inflation further.

“Now the policy rate will decline again,” Erdoğan said in a speech late on Wednesday.

“Inflation is now falling together with the decrease in interest rates,” he said.

Erdoğan, who asserts that higher interest rates stoke inflation, replaced the governor of the central bank in July, causing concern among investors who say the bank’s independence from political interference, once enshrined in IMF reforms, has eroded. Later in July, central bank policymakers cut the benchmark interest rate by 4.25 percentage points to 19.75 percent.

Inflation in Turkey has slowed to 15 percent in August from 25.2 percent in October, a fifteen-year high, opening the way for more rate cuts. Economists say that a severe economic slowdown in the country, which has depressed domestic demand, could mean inflation eases to single digits by October before accelerating again.

Erdoğan said his government is not satisfied with the country’s economic performance and is determined to ensure that the economy grows by at least 5 percent next year. It has contracted on an annual basis for the last three quarters after a currency crisis erupted last summer.

The central bank's Monetary Policy Committee will meet to decide on rates on Sept. 12.