Turkish President Erdogan: Interest rates will fall significantly before the 2023 election

Turkish President Erdogan on Tuesday said that Turkish interest rates will fall significantly before the 2023 election and inflation will fall too, according to Reuters. Erdogan said earlier in the session that Turkey is pushing back the policy of high interest rates with the "back of its hand", before adding that recent volatility in the exchange rate is not based on economic fundamentals. 

Moreover, he also said that there is no going back from the current economic model and that the economy will no longer live in the trap of inflation, high interest rates and the exchange rate. Those attacking the Turkish economy will not succeed, he added. Erdogan also said that he hoped Turkey would post a current account surplus in 2022 and that stability in the exchange rate can only be possible with exports and tourism income.

Market Reaction

It's been a volatile session for the ever beleaguered lira, with the pair up around 5.0% on the day just below 13.50, having briefly hit the half-round figure to match the record high printed last week. In wake of the latest inflammatory remarks from President Erdogan, who seems intent on worsening the CBRT credibility/currency crisis, a break above 13.50 seems likely.