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President Recep Tayyip Erdoğan on Monday vowed that Turkey will continue lowering interest rates rather than increasing them, in his most explicit remarks that come as inflation soars.
“This government will not hike interest rates, no one should expect this from us. On the contrary, it will continue cutting them,” Erdoğan said in a televised address after a Cabinet meeting.
Erdoğan reiterated his opposition to higher borrowing costs, which he says only makes “the rich richer and the poor poorer.”
The president redoubled his commitment to boosting production, exports and employment with the low-rates policy, and again promised a current account surplus that will eventually steady the currency and cool inflation.
Fueled by soaring food and energy prices, Turkey’s annual inflation rate rose at a lower-than-expected pace in May but still jumped to a 24-year high of 73.5%.
Erdogan often calls high interest rates the “mother of all evil.”
Higher interest rates make it more expensive for households and businesses to borrow money.
Turkey’s consumer price index has surged since last autumn as the Turkish lira weakened after the central bank in September embarked on a 500 basis-point easing cycle.
Prices have been increasing despite tax cuts on basic goods and government subsidies for utility bills to ease the burden on household budgets.
The central bank has held its benchmark interest rate steady at 14% in five meetings this year and said disinflation will start due to other measures, the so-called base effect and an expected end to the Ukraine conflict.
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