Interest rate lobby pressuring Turkey to hike rates, newspaper says

A so-called interest rate lobby is urging the new governor of the central bank to raise interest rates sharply at a meeting next week, pro-government newspaper Yeni Şafak said.

The pressure on Central Bank Governor Naci Ağbal, appointed by President Recep Tayyip Erdoğan at the weekend, is intensifying even after Erdoğan said on Wednesday that interest rates are a cause of inflation, Yeni Şafak said.

The lobby is returning after an attack on the lira in the summer of 2018, the newspaper said. The group also sought to bring the economy to its knees during the nationwide Gezi Park protests of 2013 and again during an attempted military coup in 2016, it said.

Erdoğan told his deputies at a speech in parliament that “interest is the cause, inflation is the result” and that Turkey would overcome this problem.

“We are determined to achieve our goals. Preserving the purchasing power of our citizens and improving income distribution depends on this and we will achieve this,” Yeni Şafak cited Erdoğan as saying.

The central bank next meets on interest rates on Nov. 19. The benchmark rate in Turkey stands at 10.25 percent and compares with annual inflation of 11.9 percent.

Erdoğan sacked Central Bank Governor Murat Uysal on Saturday and replaced him with Ağbal, the head of his presidential strategy and budget committee, after the lira sank to a record low of 8.58 per dollar on Friday.

The currency has since strengthened to trade at 7.8889 per dollar as investors anticipated that the central bank would raise interest rates significantly.