“The central bank is standing still while everyone else in the world is cutting interest rates,” Erdogan told businessmen during an address at his palace in Ankara today. “We have no difficulty with regard to oil, on the contrary, we are in a very very good position. In the circumstances, we must speedily ensure this gets passed on to our people and investors.”
Erdogan, who said he would call policy makers to discuss the reduction if necessary, made the comments after cuts from the Reserve Bank of India, Egypt and Peru yesterday. Turkey benefits from the slide in oil prices because the country imports more than 90 percent of its crude. Erdogan has repeatedly called on the central bank to lower rates to spur the economy, raising questions over the body’s independence.
The lira retreated 1 percent to 2.3346 a dollar by 6:15 p.m. in Istanbul, bringing its drop this week to 1.7 percent. The currency’s depreciation was a key reason behind the central bank’s decision to more than double its benchmark interest rate to 10 percent last January, before lowering it to 8.25 percent by July.
Policy makers will convene on Jan. 20 to determine interest rates after year-on-year inflation dropped to a 10-month low of 8.2 percent in December — still more than three percentage points above the central bank’s target. The lira is trading within 3.4 percent of its record low.
“We do not rule out seeing a limited cut of around 25 basis points to 50 basis points” following Erdogan’s comments, Gulay Elif Girgin, the chief economist at Seker Yatirim in Istanbul, said in an e-mailed note.
Lower oil prices may help Turkey more than halve its current-account deficit to less than $30 billion this year, Finance Minister Mehmet Simsek said yesterday. The yield on 10-year bonds climbed 18 basis points today, paring this week’s decline to five basis points. The Borsa Istanbul 100 index of equities dropped 0.4 percent.
Source : Bloomberg