Erdogan tells Turks to trust new economic model as pound weakens

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A U.S. one dollar banknote is seen next to Turkish lira banknotes in this illustration taken in Istanbul, Turkey November 23, 2021. REUTERS/Murad Sezer

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ANKARA, Dec 8 (Reuters) – President Tayyip Erdogan said on Wednesday that Turks needed to be patient and have faith in his government’s new economic model, under which he has prioritized rate-led economic growth low interest rate as the lira fell 2% to record lows.

The lira’s decline was driven by aggressive monetary easing that economists and opposition politicians say was reckless. Inflation jumped to a three-year high of 21.3% last month. Read more

Speaking after a cabinet meeting, Erdogan said price hikes in Turkey were caused by greed and import prices, adding he would not allow what he called the ‘major crime’ of stockpiling in an institution.

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

The lira weakened as much as 2.6% to 13.8070 against the dollar before Erdogan spoke. It traded at 1:73 p.m. 4:51 p.m. GMT. It has lost 46% of its value to the US currency this year, reaching an all-time low of 14.0 last week.

Despite its reserves being depleted, the central bank intervened in markets twice last week for what it said were unhealthy prices, keeping the lira below 14 to the dollar. Read more

The central bank has cut its key rate by 400 basis points since September, under pressure from Erdogan, and is expected to ease policy further this month.

Erdogan said financial market volatility will eventually stop and price increases from rising energy costs will stabilize soon. He called on Turks with foreign currencies to take advantage of the opportunities of his new economic model.

Earlier, Turkish media reported that Erdogan repeated his commitment to low interest rates on a flight returning from Doha.

He also told reporters on the flight that he did not recognize European rulings calling for the release of philanthropist Osman Kavala and Kurdish politician Selahattin Demirtas and would respect Turkish court rulings on them. Read more

Last week, the Council of Europe told Turkey it was preparing “infringement proceedings” for its failure to release Kavala, a move that could lead to Ankara’s suspension from the body. He also urged Turkey to release Demirtas. Read more

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Written by Daren Butler Editing by Tuvan Gumrukcu and Jane Merriman

Our standards: The Thomson Reuters Trust Principles.

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