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ANKARA, Nov 17 (Reuters) - Turkish President Tayyip Erdogan accelerated a market meltdown on Wednesday when he pledged to continue his battle against interest rates "to the end", sending the lira to new depths and prompting opposition leaders to call for early elections.

Erdogan said he would lift the interest rate burden from people and urged businesses to take advantage of aggressive monetary easing since September to invest, hire and export goods.

The president's interference in monetary policy has rattled the currency for years and battered the credibility of the central bank that has slashed its policy rate by 300 basis points since September, to 16%.

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The comments came a day before the bank is expected to cut again despite inflation soaring to near 20%.

The lira tumbled as much as 3% on Wednesday and is by far the worst performer in emerging markets this year, due largely to what analysts call premature and risky easing by a central bank seen to have buckled to Erdogan's demands. read more

"We will lift this scourge of interest rates from people's backs. We certainly cannot allow our people to be crushed by interest rates," he told lawmakers from his ruling conservative AK Party in parliament.

"I cannot and will not stand on this path with those who defend interest rates," Erdogan said, repeating his unorthodox view that high rates cause inflation.

The president describes himself as an enemy of interest rates, regularly speaks out ahead of policy decisions, and has overhauled the central bank's leadership, firing three policymakers last month.

In response to Erdogan's comments, the lira touched new all-time lows of 10.6810 to the dollar and beyond 12 to the euro.

The currency is down 30% against the dollar this year and some 64% over four years, eating into the earnings of Turks along with mostly double-digit inflation.

"The central bank gave up on its (price-stability) function and ... only looks at the lira's depreciation, the rise of the exchange rate as spectators," said Kemal Kilicdaroglu, leader of the Republican People's Party (CHP).

"You cannot govern the country," he said of Erdogan. "Let us go to elections at once. Let a new government be formed."

Turks have cited economic mismanagement in opinion polls that show Erdogan's support at multi-year lows. Elections are due no later than mid-2023.

Adding to market unease over already thin official foreign currency reserves, Reuters reported citing sources that Turkey's state energy company BOTAS is expected to turn to the central bank to meet its hard currency needs this winter. read more

A rally in the dollar also weighed on the lira.

MORE RATE CUTS?

The central bank's aggressive easing bucked expectations in recent months and left it virtually alone in a world of policy tightening. But it delivered stimulus long sought by Erdogan.

The bank says price pressures are temporary, and it is expected to cut rates by another 100 basis points to 15% on Thursday, according to a Reuters poll.

As he left parliament, Erdogan said the central bank would decide on rates independently when its monetary policy committee meets at 1100 GMT on Thursday.

Piotr Matys, senior FX analyst at In Touch Capital Markets, said cutting rates then would be too risky with the lira under pressure, and he predicted no policy change.

"In order to stabilise the lira, the bank would have to reverse those 300-basis-point cuts since September but I think that the bar for it to make a U-turn is still set fairly high," he said.

"Tomorrow's meeting could prove the most important for (Central Bank Governor Sahap) Kavcioglu. Allowing the lira to fall at such a rapid pace will cause serious damage to the Turkish economy," Matys added.

The lira's depreciation stokes prices via imports and raises default risks for companies with foreign currency debt.

Erdogan, who appointed Kavcioglu in March, questioned why business people did not take out loans and invest as rates were lowered.

"Then they get together (and) talk about high interest rates," he said, referring to the main business group TUSIAD and others.

"What type of people are you? If you are a businessman you are on the side of investment, so here you go: loans with low interest," Erdogan said, adding he expected them to raise investment, employment, exports and production.

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Editing by Jonathan Spicer, Alex Richardson and Giles Elgood

Our Standards: The Thomson Reuters Trust Principles.

The rest is here:
Erdogan's pledge to fight interest rates sends lira ...

A logo of Turkey's Central Bank is pictured at the entrance of its headquarters in Ankara, Turkey October 15, 2021. REUTERS/Cagla Gurdogan/File Photo

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LONDON/ISTANBUL, Nov 17 (Reuters) - Turkey's central bank is expected to deliver more interest rate cuts on Thursday - a move that President Tayyip Erdogan will likely cheer but which analysts warn could lift inflation higher and accelerate the demise of the lira.

The currency has suffered a steep selloff in the run up to the bank's policy decision expected at 2 p.m. (1100 GMT) on Thursday, slumping more than 6% in November and crashing through the 10 to the dollar watershed to a new record low.

Here are four questions facing the central bank, which has slashed policy rates by 300 basis points since September:

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1/WHAT WILL THE CENTRAL BANK DO?

Turkey is expected to reduce its policy rate by 100 basis points to 15%, according to a Reuters poll. read more

While inflation is at 2-1/2 year highs, analysts predict October's lower-than-expected reading increased the likelihood of a cut, although some caution the speed of the lira's recent tumble may stay the bank's hand.

Erdogan holds the unorthodox view that lower rates will tame inflation and ousted the last three central bank chiefs over a 20-month span due to policy disagreements.

Governor Sahap Kavcioglu, appointed in March, ended months of hawkish talk in September when he laid the groundwork for easing. The central bank acknowledged last month there was limited room for further monetary policy easing by year-end.

However, recent cuts have shredded any remaining investor confidence in the bank's independence.

Erdogan, a self-described enemy of interest rates, has his eyes firmly on elections to be held no later than mid-2023. With his popularity slipping in opinion polls, the pragmatic president could rethink his push for monetary stimulus - or refuse to back down despite the lira pain.

2/HOW LONG CAN TURKEY PLAY THIS GAME?

Cutting rates despite double-digit inflation and a tumbling currency is dangerous, say analysts.

"Unless we see a significant policy reversal in Turkey any time soon, the country looks set to head into its third currency crisis since 2018," said Erik Meyersson, a Stockholm-based senior economist at Handelsbankenan who specialises in Turkey.

Turkey has far less ammunition to defend the currency than in previous years with foreign exchange reserves falling. Central bank reserves in Q2 covered fewer than three months worth of imports, down from 4.5 in 2019.

But Turkey may not be able to cut much further, especially with central banks globally, including the U.S. Federal Reserve, preparing to tighten policy to curb inflation.

"Going forward, we don't think that the current policy mix is sustainable and rates will eventually need to go higher," Goldman Sachs analysts said, forecasting rates to fall to 15% by year-end followed by 300 basis points of hikes in the second half of 2022.

Another risk is the large volume of short-term dollar-denominated debt Turkey must repay.

3/WHERE IS INFLATION HEADED?

Annual inflation rose to 19.89% in October - four times the central bank's target, although it argues price pressures are temporary. Policymakers recently shifted emphasis to core inflation, which stood at 16.83%.

Global pressures from soaring post-pandemic demand, supply chain disruptions and an energy price rally have exacerbated pressures from the weak lira.

Producer prices soared 46.31% year-on-year in October, suggesting inflation should remain elevated for several more months. Deutsche Bank predicts headline inflation will stay above 20% in the first half of next year and end 2022 at 16%.

4/ WHAT IS ERDOGAN'S ENDGAME?

Rampant inflation and the tumbling lira have hit Turkish consumers hard, eating into earnings. This has unnerved Erdogan, whose conservative AK Party has ruled for 19 years on a reputation for delivering a strong economy and household wealth.

Erdogan's gamble is that rate cuts will boost the economy by supporting lending, exports and jobs. Economists say exports are unlikely to benefit from a weaker currency because of companies' high foreign debts.

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Reporting by Tommy Wilkes in London and Jonathan Spicer in Istanbul, editing by Karin Strohecker and Richard Pullin

Our Standards: The Thomson Reuters Trust Principles.

Original post:
Will Erdogan get more cuts? Four questions for Turkey's ...

Recep Tayyip Erdogan has held power in Turkey for almost 20 years, first as prime minister, then as President. With inflation soaring and his currency collapsing, Erdogans eccentric ideas about economic policy seem to have made a bad situation worse but what if we saw things from his perspective? We steal a memo on Erdonomics from deep inside the Turkish Presidential Palace.

From: the Desk of His Excellency, Recep Tayyip Erdogan, President of Turkey

My Dear Turks,

I write this with a heavy heart, but a very fine pen.

We have seen large scale public borrowing, a currency crash, runaway inflation, and resignations from the Central Bank because its leaders wanted to lower interest rates.

No, my friends, I am not talking about the past few months, a scene painted by biased Western media, which even doubts that I got a college degree (of course I did, though nobody seems to believe me, but I digress).

Rather, I am referring to the dark days of 1994, when you voted for me as mayor of Istanbul.

The financial crisis which we were experiencing then had crippled us. I drew you out of that mess by throwing everything I could at beautifying Istanbul. I brought you green buses, I built you recycling plants. I even gave you my email address in order to let you have a direct role in governance. Surely, my experiment changed Istanbul, the City of Centuries. Thus, I decided to rule for centuries.

But not without challenges. When you voted me in as prime minister in a 2002 landslide, we were crippled by another financial crisis, thanks to the ineptitude of those I had replaced: the lira was totally out of control, confidence in the economy was so low that almost two-thirds of bank accounts were held in foreign currencies, and allegations of corruption against the former leadership had weakened our great nation. Of course, no such aspersions whether about corruption, mismanagement or desperate dollarization can be cast against my current government. I repeat, none!

Lets travel back to those early days. When I took over, things changed immediately. We bounced back, like the great Ottomans did after their mediocre European campaigns (unfortunately, our own recent European campaigns have been thwarted by continental arrogance and conspiracy). But back to that golden era during my first term: under my watch GDP almost tripled in just four years, foreign direct investment boomed, and unemployment and inflation dropped to record lows.

My dear friends, you didnt appreciate what a good thing you had going for you.

You were thankless. You protested against progress. So, I pushed back. And when your Western backers didnt take a hint, and attempted an extra-constitutional coup, I fought back with a constitutional one that made things right, and put me properly in charge.

Now, you and your friends are at it again, doubting my plans for our economic revival.

My dear Turks, as I said at parliament recently, both the Quran and I can assure you: with lower interest rates come fewer worries and more borrowing and spending! If we shed the evil of usury, you will be self-sufficient and produce more exports. Growth will follow, Inshallah!

I want to put your money where my mouth is: in my personal resolve to cut interest rates, I have even kept every scissor I have ever used on display. After all, my economics are built on family and friends, on liberating our workers, and fighting a war of economic independence.

Trust me, brothers and sisters. My plan, based on theories by economists old and new, now depends on you. I will guarantee a return on your deposits, but only if your deposits are in liras. Things are already in motion for your benefit: price hikes have been offset by an increase in your wages. Foreigners are returning, the lira is already bouncing back, even though I had to sell billions of dollars to intervene.

And whats a little lira weakness if it helps us to export to the world the wonderful things we make, eh? Wouldnt our African brothers, also victims of Western predators, be safer with more of our armed drones? Remember, my friends: we are in the midst of the Learned Helplessness Syndrome. The independence of the Central Bank is overrated, and not necessary for those who love their country! Orthodoxy is slavery! We will break these shackles! Cok yaa Trkiye!

And do not forget, there is such a thing as Turkish exceptionalism. It was Turks who invented the COVID vaccine (even though they were in Germany). It is the Turks who are doing the most to stop Russia from invading Ukraine. It is the Turks who will help stabilize our brothers in Africa. Even Elon Musk not a Turk but still a nice man who considered it an honor to meet me has promised to enhance our search for the stars, by putting our satellite into space.

We are a great nation, my friends. Weve seen these bread lines before. But these Western reports about hunger and desperation are getting old. I am convinced that, after I stop a run on the banks, when all of this is over, we will be a breakout star. I urge you: dont believe the naysayers. Borrow freely, spend abundantly, enjoy life and dont forget to vote in 2023!

Excerpt from:
In Erdogans shoes: What is he thinking? - GZERO Media

There has been no idea any any agreement on a meeting with Turkeys President Regep Tayyip Erdogan, Prime Minister Nikol Pashinyan said at an online press conference today.

He added, however, that if the discussions between the special representative go ahead successfully and the process matures to that point, meetings on high and highest level will naturally follow.

It will definitely take place if the process goes successfully, the Prime Minister said.

He added, however, that the date of the meeting of the special representatives is yet to been agreed. The Prime Minister said it will be a definitely be a lengthy process, not one, two or three meetings, and added that there should not be exaggerated expectations.

As for the recognition of the Armenian Genocide, PM Pashinyan said it has never been a precondition for normalization of relations with Turkey.

The Armenian side, all authorities without exception have said that they are ready to normalize relations with Turkey without preconditions, which means that the recognition of the Armenian Genocide has not been a precondition for normalization of diplomatic relations and opening of borders, the Prime Minister said.

He added, however, that the stance on the international recognition of the Armenian Genocide is enshrined in the Governments program.

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No agreement on meeting with Erdogan, Armenian PM says Public Radio of Armenia - Public Radio of Armenia

Command? Dear Mr President, surely as one who aspires to be a Muslim hero you have read the Quran. Therein stands the clear injunction: Allah has permitted trade and has forbidden interest/usury (2:275). Forbidden here does not mean negotiating what is low or middle or high forbidden means zero, exactly zero. Haram is haram. This is why all early Muslim scholars rejected interest. Many scholars still do today, particularly Arabs and Pakistanis. In 2014, the top ulema of Pakistan belonging to the Fiqhi Majlis said that even the so-called Sharia-compliant Islamic banking merely renames interest as profit and, as such, is deception. All banking, they concluded, is haram. Historically, banking was absent in Muslim countries until the 18th century because nothing except zero interest can be allowed. The Ottoman rulers of Turkey were, however, not ideologues. As pragmatists who ran an empire, they broke the ban on banking because they well knew that no banking meant no trading. This Western innovation had to be adopted come what may. But, to be safe, they first looked around for muftis who could justify European banking and found some. One can endlessly debate whether these justifications are genuine or manufactured.

Read more here:
Erdogan and Imran are letting emotions run far ahead of reason - Times of India