Erdogan says plans to take greater control of economy

Lira hammered after president’s comments

ISTANBUL, May 15, (RTRS): Investors hammered Turkey’s lira on Tuesday, sending it to a record low after President Tayyip Erdogan said he plans to take greater control of the economy after next month’s election, deepening concerns about his influence on monetary policy.

Erdogan’s comments, in an interview with Bloomberg Television in London, reinforced longstanding worries about the central bank’s ability to fight double-digit inflation amid the president’s drive for lower interest rates.

He said the central bank, while independent, would not be able to ignore signals from the new executive presidency that comes into effect after the June polls. A self-described “enemy of interest rates”, Erdogan wants borrowing costs lowered to fuel credit and new construction.

“I will take the responsibility as the indisputable head of the executive in respect of the steps to be taken and decisions on these issues,” he said in the interview broadcast on Tuesday.

Turkey has called snap presidential and parliamentary elections for June 24 and polls show Erdogan as the strongest candidate to win the presidential vote. Turks narrowly backed a switch to an executive presidency in a referendum last year.

That change is due to go into effect after the vote.

Erdogan’s comments

helped pushed the ailing lira to a fresh record low of 4.4604 against the dollar, bringing its decline this year to more than 14 percent.

It clawed back some of its losses after one of his advisers, Cemil Ertem, said the central bank had the independence to use all the tools at its disposal.

Yields on 10-year government bonds briefly touched their highest since at least January 2010.

“Centralisation of power and interference in the monetary policy is a concern to us,” said Dietmar Hornung, an associate managing director and head of European Sovereigns at ratings agency Moody’s, at a conference in London.

However, Erdogan’s economic adviser Ertem said the reduction of rates was a general target, rather than a specific aim of the bank’s next rate-setting meeting on June 7 — comments likely designed to take some pain off the lira.

“President Erdogan’s emphasis is not directed towards June 7. What the president says is that interest rates should be reduced as a target,” he told Reuters.

Erdogan said citizens would ultimately hold the president responsible for any problems generated by monetary policy.

“They will hold the president accountable. Since they will ask the president about it, we have to give off the image of a president who is effective in monetary policies,” he said.