Erdoğan’s governing party sees Turkish lira pressure as temporary
Senior officials of Turkish President Recep Tayyip Erdoğan’s governing Justice and Development Party’s (AKP) said negative pressure on the Turkish lira was a temporary phenomenon, BBC Türkçe reported on Wednesday.
The fluctuation in foreign exchange rates is a short-term reaction of the markets to a "new economic model" announced by Erdoğan, said the AKP officials, who met in small groups throughout Tuesday, according to BBC Türkçe.
The implementation of this new policy will have a positive impact on the economy in five to six months, they said.
Turkey’s central bank has cut interest rates to 15 percent from 19 percent over the past three months even after inflation accelerated to almost 20 percent. The policy has sparked a sharp sell-off in the lira. The Turkish currency has sank to new depths, taking losses this year to about 45 percent, after Erdoğan defended a policy of cutting interest rates on Monday. He reiterated his unorthodox belief that higher borrowing costs were inflationary and vowed to emerge victorious from “an economic war of independence”.
The lira was trading up 2.2 percent at 12.53 per dollar at 12:26 p.m. local time on Wednesday.
It was decided to try an economic model that would "resist exchange rate pressure" and encourage investment with low interest rates, according to the AKP officials, BBC Türkçe said.
The fluctuation in the exchange rate will stop at a certain point, and investment will be encouraged by keeping interest rates low, the officials said. Production and employment will be affected positively, they said.
The central bank will not raise interest rates, they said.