Lower rates seen as ‘vi­tal’

Financial Mirror (Cyprus) - - FRONT PAGE -

The Turk­ish govern­ment will main­tain its calls for lower in­ter­est rates fol­low­ing Er­do­gan’s vic­tory, the coun­try’s econ­omy min­is­ter said on Mon­day.

“The Cen­tral Bank’s in­ter­est rates have to come down. The Cen­tral Bank has to be ahead of the mar­ket. If you fol­low the mar­ket, then the mar­ket starts man­ag­ing you,” Econ­omy Min­is­ter Ni­hat Zey­bekci, who has re­peat­edly called for rates to be low­ered, told Reuters in an in­ter­view.

He said that the cen­tral bank’s core man­date for price sta­bil­ity should be ex­panded to in­clude em­ploy­ment and growth, although he added this would not be a top pri­or­ity for the govern­ment in the com­ing pe­riod.

The need to con­sider ad­di­tional fac­tors be­yond in­fla­tion could give the cen­tral bank more im­pe­tus for low­er­ing rates.

“Our pol­icy on in­ter­est rates is clear. We be­lieve that in­ter­est rates are im­por­tant in Turkey for the re­vival of do­mes­tic de­mand, in­vest­ment and growth,” he said.

Zey­bekci said in­ter­est rates needed to come down in line with in­fla­tion ex­pec­ta­tions, point­ing out that while an­nual in­fla­tion was cur­rently run­ning at 9.3%, for­ward ex­pec­ta­tions for 12 months’ ahead are at around 7%.

“We see in­ter­est rates as an im­por­tant fac­tor in cost in­fla­tion.”

Er­do­gan, who won close to 52% of the vote, had said ahead of the vote that there would be no de­vi­a­tion from eco­nomic poli­cies if he won.

“This [elec­toral] mes­sage means the ap­proval of poli­cies that were im­ple­mented up to now and the con­tin­u­a­tion of po­lit­i­cal and eco­nomic poli­cies,” Zey­bekci said, ac­knowl­edg­ing the re­sult had not been as strong as some of Er­do­gan’s sup­port­ers had hoped. “It also car­ries a bit of a warn­ing. We un­der­stood all this very clearly,” he said.

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