Turkey's Erdogan calls for rate cut, says no early election

He said the economy was "in a good trend" and that political stability and lower interest rates would encourage investors.

Turkey's Erdogan calls for rate cut, says no early election

World Bulletin/News Desk

Turkish Prime Minister Tayyip Erdogan called for an emergency interest rate cut, ruled out early elections and spoke against the lifting of a Twitter ban on Friday.

Returning to the public eye after several days of rest following his AK Party's strong showing in local polls last Sunday, Erdogan said markets had rallied on the back of the election results and lower interest rates would encourage investors to pump more money into Turkey.

But his efforts to dictate monetary policy unnerved the markets, with the lira weakening on fears that political pressure to keep rates low could compromise the central bank's ability to fight rising inflation and external imbalances.

"Yields are falling. In line with this, the central bank will probably convene an extraordinary monetary policy committee meeting," Erdogan said, adding that it should "review" its decision to hike rates at an emergency meeting in January.

"Just like it convened extraordinarily last time to hike rates, this time it should convene and lower interest rates," he told a news conference before departing on a trip to Azerbaijan.

Erdogan's AK Party dominated the electoral map in Sunday's elections, retaining control of the two biggest cities, Istanbul and Ankara, and raising its share of the national vote despite a corruption allegations and a feud with an influential U.S.-based Islamic cleric.

Investors largely welcomed the outcome, taking it is as a sign of continuity after a turbulent election campaign, but they also fear it could fuel Erdogan's domineering instincts, including his readiness to interfere in monetary policy.

"Suffice to say, very negative and disruptive comments," Timothy Ash, head of emerging markets research at Standard Bank in London, said of Erdogan's latest words.

"Politicians should steer clear of making such specific comments over monetary policy in countries which are supposed to operate with independent central banks," he said.

Economy Minister Nihat Zeybekci reinforced Erdogan's comments, telling reporters high interest rates were bad for the economy and that the central bank had room for manoeuvre.

There was no immediate comment from the central bank but the timing came a day after governor Erdem Basci sought to reassure investors at an event in London that its current tight monetary policy was sufficient to tackle inflation.

The bank stunned markets with a massive rate hike at the end of January, ignoring political pressure as it battled to defend the lira following its fall to record lows. 

NO EARLY ELECTION

Turkey's growth in the last decade has largely been based on the stability brought by Erdogan, who took office in 2002 after a series of unstable coalition governments in the 1990s ran into repeated balance of payments problems and economic crises.

Keen to maintain that reputation, Erdogan has railed against what he describes as an "interest rate lobby" of speculators seeking to undermine the economy by pushing for higher rates.

But economic headwinds are gathering, with growth slowing, inflation persistently above target and consumer confidence hitting a four-year low in February. Ratings agency Fitch on Friday cut its growth forecasts for this year and next, although it kept its BBB- investment grade credit rating.

A slowing economy had been seen as one argument for bringing forward general elections due in June next year to run alongside a presidential race this August. But Erdogan ruled out such a move, saying it would only serve to unnerve investors.

"Never early elections. This is a principle of our party. We should get on with our jobs," he said.

Erdogan has made no secret of his desire to run in the presidential race, Turkey's first direct election for its highest office.

Erdogan said he favoured keeping a three-term limit for AKP members of parliament, a rule that would prevent him from seeking a fourth term as prime minister, further reinforcing the expectation that he will make a presidential bid.

There had been speculation in Turkey that the AK Party could also change its internal rules to enable Erdogan to serve a fourth term as prime minister.

President Abdullah Gul is seen as a potential future prime minister should Erdogan run for the presidency. Both are founding members of the ruling party, although their relationship has at times appeared strained.

"I share the view of Gul that we can discuss among ourselves the presidency and reach a decision," Erdogan said, keeping his cards close to his chest.

Erdogan also criticised a constitutional court ruling lifting a ban on Twitter, saying the court should have rejected an application to restore access to the micro-blogging site.

"We complied with the ruling but I do not respect it," Erdogan told reporters at a news conference before departing on a trip to Azerbaijan. "It should have been rejected on procedural grounds."

Access to Twitter was blocked on March 21 in the run-up to local elections and Turkey's telecoms authority lifted the two-week-old ban on Thursday after the court ruled the block breached freedom of expression.

Last Mod: 04 Nisan 2014, 14:18
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