Turkey's Erdogan says his economic views are same but will accept minister's policies

President Recep Tayyip Erdogan says he remains firm on his unconventional approach to Turkey’s economy

Turkey Economy (Copyright 2023 The Associated Press. All rights reserved)

President Recep Tayyip Erdogan said in comments published Wednesday he remains firm on his unconventional approach to Turkey's economy, but suggested his recently appointed finance minister will have leeway to move away from policies many have blamed for a worsening cost-of-living crisis.

Erdogan, who was reelected last month, reappointed Mehmet Simsek, an internationally respected banker, to the post of treasury and finance minister in a sign of a pivot from his unusual economic policies. He also appointed Hafize Gaye Erkan, a former U.S.-based bank executive, to head the central bank. She became Turkey’s first woman central bank governor.

But lingering uncertainty over Erdogan’s economic direction — coupled with 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.

Speaking to reporters on his return from a trip to Azerbaijan on Tuesday, Erdogan said he “accepted” Simsek’s requests for a fresh economic program, but that his personal stance on interest rates has not changed.

“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. “We accepted that (Simsek) should take the necessary steps rapidly and effortlessly with the central bank.”

His comments were reported by the state-run Anadolu Agency and other media on Wednesday.

Critics blame the cost-of-living crisis on Erdogan’s unorthodox approach of keeping interest rates low, which runs contrary to conventional economic thinking that raising rates will combat inflation. Central banks including the U.S. Federal Reserve, European Central Bank and others worldwide are hiking borrowing costs to bring down spikes in consumer prices.

Asked if Erkan’s appointment as the new central bank governor was his idea, Erdogan said that Simsek pitched the idea of her appointment 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 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.

She replaced Sahap Kavcioglu who oversaw a series of rate cuts since 2021.