Turkey’s central bank will provide “stronger support” for the government’s economic programme, Recep Tayyip Erdogan said as he launched a scathing attack on its former governor and called for lower interest rates.

In his most detailed comments since firing Murat Cetinkaya on Saturday, the Turkish president sought to justify the decision to oust him after a clash over the pace and depth of rate cuts. Describing Mr Cetinkaya as “our colleague who wouldn’t follow instructions”, he added: “He was always defending those who want high rates.”

Mr Erdogan, who is a known opponent of high interest, repeated his view that it was “the mother of all evil” and said he wanted to get both interest and inflation down to the single digits. The central bank’s interest rate is 24 per cent.

In a televised address, the Turkish president said that, thanks to a new system of governance that came into force last year, he now had the authority to “intervene” in the bank. Mr Erdogan said: “From now on, the central bank will provide stronger support for our economic programme.”

He added: “You will see soon how interest rate policy will be shaped.”

The president also rejected calls for Turkey to seek the support of the International Monetary Fund. “There are people who advise us to go to the IMF,” he said. “That door is closed.”

The decision to sack Mr Cetinkaya has deepened market concern about the Turkish president’s grip on all aspects of policymaking, including economic management, and about the erosion of independence at the central bank.

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Investors are anxious that Murat Uysal, the bank’s new governor, will face pressure to cut rates aggressively if Mr Erdogan seeks a return to the era of credit-fuelled growth that preceded a sharp fall in the lira last summer. 

Many economists argue that Turkey would benefit from a period of lower growth and a focus on structural reforms after the currency crisis, which wiped 30 per cent off the value of the lira in 2018, accelerated inflation and triggered a recession.

Mr Erdogan has shown little interest in heeding that advice. On Tuesday a government development plan submitted to the Turkish parliament predicted annual average growth of 4.3 per cent between 2019 and 2023. Last year, the economy grew 2.6 per cent.

In comments published earlier on Wednesday, Mr Erdogan said the central bank needed a “complete overhaul”. According to the Haberturk news site, he told reporters who accompanied him on a trip to Bosnia: “Unless we completely overhaul it, unless we put it on a firm foundation, we may face serious problems.” He did not provide further details of the plan.

Mr Erdogan confirmed claims by people familiar with discussions in the lead-up to Mr Cetinkaya’s dismissal that his son-in-law, the finance minister Berat Albayrak, had spearheaded the move. “Our colleagues, notably the Treasury and finance minister, carried out an assessment. After this assessment, we decided that a change would be beneficial,” he said.

The president also offered his first public assessment of the decision by an influential former economy minister to resign from the ruling Justice and Development party (AKP) — a move that could pave the way for a split in the religious conservative party.

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He said he had warned Ali Babacan during a recent meeting that he had “no right” to leader a splinter group. “I said to Ali, I accept that your path is your path, but do not forget: you have no right to divide the Muslim community. That’s what you are doing. You will get nowhere with this.”

Via Financial Times