Turkish leader says his economic views are same but he’ll accept finance minister’s approach

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This article was published 14/06/2023 (913 days ago), so information in it may no longer be current.

ISTANBUL (AP) — Turkish President Recep Tayyip Erdogan said his economic policies have not changed but he suggested in comments published Wednesday that his finance minister will have leeway to move away from an unconventional approach that many have blamed for a worsening cost-of-living crisis.

Erdogan, who was reelected to a third term last month, appointed Mehmet Simsek, an internationally respected banker who served in the Cabinet previously, as treasury and finance minister. He also picked Hafize Gaye Erkan, a former U.S.-based bank executive, to head the central bank, the first woman hold the role.

While the appointments signaled a shift in the longtime Turkish leader’s views on how to stimulate the economy, lingering uncertainty over Erdogan’s position and an apparent move to loosen government controls of foreign currency exchanges led Turkey’s currency to plunge to record lows against the U.S. dollar last week.

Erdogan said he had accepted Simsek’s request for a fresh economic program but that his personal stance on keeping interest rates low amid rising inflation was unchanged.

“Some of our friends should not fall into the error of (asking) ‘Is the president going to make a serious change (concerning) interest rate policy?’ I remain in the same position,” Erdogan said while returning from a state visit to Azerbaijan on Tuesday. “We accepted that (Simsek) should take the necessary steps rapidly and effortlessly with the central bank.”

Turkey’s state-run Anadolu Agency and other media reported his comments on Wednesday.

Critics blame the cost-of-living crisis on Erdogan’s unorthodox interest rate policy, which runs contrary to conventional economic thinking that raising rates will combat inflation. Central banks elsewhere, including the U.S. Federal Reserve and the European Central Bank, have increased borrowing costs to bring down spikes in consumer prices.

Asked if Erkan’s appointment as the new governor of the Central Bank of Turkey was his idea, Erdogan said Simsek had pitched the idea to him.

“We thought we would have a woman administrator for the central bank for once and we took this step. Of course, we told her of our expectations,” he said.

“We hope that with these steps neither our treasury and finance minister nor our central bank will let us down,” he added.

Erkan replaced Sahap Kavcioglu, who as the bank’s governor oversaw a series of rate cuts since 2021.

She was a managing director at the Goldman Sachs investment banking company and worked at San Francisco-based First Republic Bank, holding the post of co-CEO for six months in 2021. JPMorgan Chase took over the failed bank after U.S. regulators seized it in May.