Erdoğan seeks single-digit interest rates after sacking central bank chief

Turkish President Tayyip Erdoğan said his government is seeking to lower interest rates to single figures after he replaced the governor of the central bank in March.

Erdoğan sacked former finance minister Naci Ağbal as governor overnight on March 19 after he raised borrowing costs to 19 percent from 17 percent the previous day.

“God willing, by lowering interest rates to single digits, we will also lessen their burden on the budget,” Erdoğan said on Wednesday in a televised speech to members of his governing Justice and Development Party (AKP) at the parliament in Ankara.

The lira fell 0.8 percent to 8.19 per dollar after Erdoğan spoke, trading slightly weaker than before his speech.

The central bank, under new governor Şahap Kavcıoğlu, will next meet on rates on April 15. Kavcıoğlu has sympathised with Erdoğan’s unorthodox theory that high interest rates cause inflation, but said last week that the central bank’s policy of targeting lower inflation has not changed.

Inflation in Turkey accelerated to 16.2 percent in March from 15.6 percent the previous month, the Turkish Statistical Institute said on Monday. It is expected to nudge higher in April due to higher oil and food prices and recent losses for the lira.

The lira traded at 7.21 per dollar just prior to Ağbal's dismissal.