Turkey's Erdogan says 'absolutely' against high interest rates

FILE PHOTO: Turkish President Tayyip Erdogan speaks during a meeting with businesspeople in Istanbul, Turkey, January 15, 2021. Presidential Press Office/Handout via REUTERS /File Photo

ISTANBUL (Reuters) - Turkish President Tayyip Erdogan reaffirmed his strong opposition to high interest rates on Friday, a day after the central bank said it would maintain a tight monetary policy for “an extended period”.

Calls by Erdogan, a self-described “enemy” of interest rates, for lower borrowing costs have rattled investors in the past and prompted concerns about the independence of the central bank.

“Dear friends, I am absolutely against high interest rates,” Erdogan told businesspeople in Ankara, saying lower rates would lead to more investments, which in turn would increase employment, exports and production.

“I know my friends get mad at me, but, forgive me, as long as I am the president of this country, I will continue talking about this because I do not think my country will develop with high interest rates,” he said.

Erdogan made similar comments last week, leading to concerns that the government’s commitment to tight monetary policy could be waning.

The central bank held its benchmark rate at 17% as expected on Thursday, and it promised to raise it more if needed to battle inflation, which has soared towards 15%.

Under central bank governor Naci Agbal, appointed by Erdogan in November in a move welcomed by markets, the bank hiked its policy rate by 675 basis points, helping to shore up the lira, which lost some 20% of its value against the dollar last year.

Reporting by Ali Kucukgocmen; Editing by Hugh Lawson and Gareth Jones