Turkey’s top business group calls on Erdogan to review his low-rate policy

Orhan Turan, the head of the Turkish Industry and Business Association (TUSIAD) on Wednesday said the aims of Turkey’s low interest rate policy should be reconsidered.

Turan, a critic of Turkish President Recep Tayyip Erdogan’s economy management, also said the confidence in the future of the country cannot be achieved only through economic policies, Diken news website reported on Wednesday.

“It is necessary to implement reliable and inclusive rules in all areas of business, individual and social life, to make progress in areas such as the rule of law, independence of the judiciary, freedom of expression, and the autonomy of supervisory and regulatory institutions,” the head of the leading business group said.

Turkey's inflation has surged to record highs over the past year after the central bank adopted a rate-cutting policy despite increasing prices. Acting on the orders of President Erdogan who insists on low interest rates, the central bank has lowered the benchmark one-week repo rate from 19 percent to 10.5 percent since last autumn. Last month, Turkey’s inflation rate accelerated to 85.5 percent extending to a new 24-year high. Following the rate cuts in the country, Turkish lira lost around 44 percent of its value in 2021, and a quarter more in the first half of this year.

In December, Erdogan slammed TUSIAD over its criticism of Turkey’s economic model, blaming the group of plotting to bring down his government.

“You are trying to find a way to overthrow this government and bring a new one that you can exploit. Turkish nation will not grant you this opportunity,” he said, following TUSİAD urged the government to abandon a monetary policy based on low interest rates. It called on Ankara to return to the “rules of economic science.”

Erdogan says rate hikes are against his Islamic beliefs and insists that low interest rates lead to lower inflation, an opinion that jars with conventional economic theory that says higher interest rates slow inflation.