The power struggle continues: Erdogan harshly criticizes central bank, asks if "it's kidding"

Published May 27th, 2014 - 02:55 GMT

Prime Minister Recep Tayyip Erdoğan harshly criticized a recent interest rate cut by the Central Bank of Turkey while speaking to journalists in the German city of Cologne before returning to Turkey late on Saturday. 

The central bank lowered the benchmark one-week repo rates from 10 to 9.5 percent last Thursday. “Are you kidding? You raised the rate five points all at once [in January of this year] and now you are reducing it by half a point,” said Erdoğan, adding that the bank “needs to get its act together.” Erdoğan has expressed extreme distaste for the central bank on multiple occasions in recent months, on this occasion adding that the small decrease was “a shame and a sin” and that he definitely did not like the central bank's interest policies. 

The prime minister has repeatedly called for an emergency rate cut, while the central bank has vowed to maintain its policy as long as inflation is high. Erdoğan said he believes that inflation has remained high because of high interest rates. He frequently refers to an “interest rate lobby” which he claims comprises foreign agitators attempting to sabotage Turkey's economic growth. 

He said that while he recognizes the central bank is an independent entity, he is entitled to criticize its policies as the prime minister of the country and that his criticism should not be interpreted as intervention. He voiced concern that the investment outlook would not be positive in a country with such rates, saying that rates were significantly lower in places like Japan, the United States and Israel. 

The central bank raised interest rates in January after the Turkish lira plummeted to record lows in the face of a major corruption scandal that caused nationwide political tension. The overnight lending rate was raised from 7.5 to 12 percent, while the borrowing rate was hiked from 3.5 to 8 percent.


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