Erdoğan asks households to trust the new Turkish economic model

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President Recep Tayyip Erdoğan called on citizens to be patient and trust Turkey’s new economic path, reaffirming commitment to low interest rates, which he says will boost investment, jobs , exports and growth.

Erdoğan has repeatedly endorsed a business model based on lower borrowing costs over the past month, and the government, regulators and banking associations have all embraced the new policy direction.

“We must advance Turkey’s potential,” Erdoğan said in a televised address following Wednesday’s Cabinet meeting in the capital Ankara. “We know where we are going, I ask our people to be patient,” he noted, asking the nation to have faith in the government’s plan and investments.

He called on households holding currencies to take advantage of the opportunities of the new economic model.

Although prices may be sore for a while, the president and other government officials stressed that monetary stimulus should eventually boost exports, credit, jobs and economic growth.

Erdoğan said price increases in Turkey were caused by greed and import prices, and added that he would not allow what he called the “major crime” of institutional storage.

“We are aiming for lasting prosperity, lasting stability. The prices we pay will be justified by the gains we make,” he said.

Erdoğan’s remarks come amid high exchange rate volatility after the country’s central bank cut its benchmark policy rate by 400 basis points to 15% from 19% since September. It is widely expected to lower it again this month.

On the other hand, annual inflation accelerated to 21.31% last month, its highest level since November 2018, from 19.89% in October, according to official data.

The central bank says inflationary pressure is temporary and necessary to increase credit, exports and economic growth.

A consistent and vocal opponent of high borrowing costs, Erdoğan reiterated the view that high interest rates cause inflation. He also pledged to quickly address inflation and called on citizens not to panic.

“With lower interest rates and a stable currency, we will push output and employment up,” he said.

The opposition has criticized the current policy and called for its reversal.

The Turkish lira hit a record low of 14 against the US dollar last week amid high volatility that triggered direct central bank intervention, selling dollars.

The lira was trading at 13.8050 against the US currency at 12:09 GMT, down from a close of 13.69 on Wednesday.

The Central Bank of the Republic of Turkey (CBRT) intervened in the foreign exchange market twice last week due to “unhealthy price formations” in exchange rates, keeping the lira below 14 for a greenback .

The bank had warned last month that it was seeing unhealthy price formations that are “unrealistic and completely detached from economic fundamentals”.

The president said the “competitive force” of the exchange rate leads to increased investment, production and employment.

He blamed the lira’s weakness on games he said were being played on exchange rates and interest rates, saying such scenarios had only been played in the past to fail.

Erdoğan said on Wednesday that volatility in financial markets would eventually stop and price increases stemming from rising energy costs would soon level off.

He also blamed the storage for the price spike and threatened to impose tougher penalties.

The government “will show no mercy” to individuals who stockpile and attempt to profit from rising commodity prices, the president stressed.

Earlier, Erdoğan reiterated his commitment to low interest rates on a flight returning from Doha.

He told reporters on the flight that Turkey would reduce inflation and exchange rate volatility through low interest rates.

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