Erdogan says Turkey must cut interest rates to fight inflation

Jeannie Matthews
March 30, 2019

Exchange rate fluctuations are an operation by the West, particularly the USA, to paint Turkey into a corner, President Erdogan said on Thursday, March 28, 2019.

U.S. officials have warned Turkey could face possible sanctions and a block on its participation in the US-made F-35 fighter jet programme because of the Russian deal.

Turkish President Recep Tayyip Erdogan said on Thursday that the recent fluctuations of Turkish lira were attempts against Turkey by the West, particularly the United States.

Finance Minister Berat Albayrak said on Thursday that Turkish banks were providing billions of lira to foreign markets and promised the nation would enter a reform period after the elections.

At its worst, the Turkish lira lost around 30 percent of its value against the United States dollar past year.

In truth, the sell-off shows that factors driving last year's currency crisis, such as geopolitical tensions and domestic policy, haven't gone away, says Jason Tuvey on Capital Economics.

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USA senators have introduced a bipartisan bill to stop transfer of F-35 fighter jets to Turkey amid a major rift between the North Atlantic Treaty Organisation allies over Ankara's purchase of Russia's S-400 missile defence systems. As of 1152 GMT, it had clawed back some of its losses to 5.5861.

According to the Financial Times, Turkish banks have been ordered not to sell the lira to any foreign counterparties. "Publish it, what's that going to change?"

Four U.S. senators on Thursday introduced a bipartisan bill to prohibit the transfer of F-35 fighter aircraft to Turkey until the U.S. government certifies that Ankara will not take delivery of a Russian S-400 air defense system, a statement on the move said. In February it stood at just under 20 per cent.

Erdogan on Thursday also said Turkey has to cut interest rates or the problem with high inflation will persist. "As interest rates are brought down, inflation will fall", CNBC cited the Turkish leader as saying. That's because many of them had then lent out the local currency via short-term swaps to benefit from a juicy interest rate, then suddenly found themselves unable to get the funding needed to reverse the trades.

"It's essential to discipline speculation in the markets", he said, adding that he is confident the country's economic situation will improve in the coming months.

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