(Adds central bank governor comment, details)
By Ercan Gurses and Seda Sezer
ANKARA/ISTANBUL, Sept 6 Turkish Deputy Prime
Minister Nurettin Canikli kept up the pressure for lower
interest rates on Tuesday after a series of central bank rate
cuts that were encouraged by the government.
His comments echoed a frequent refrain of President Tayyip
Erdogan, who often rails against the high cost of credit in
Turkey, and equates high interest rates with treason.
"We must definitely lower interest rates and we will do this
in the framework of market conditions," Canikli said at a
meeting with bankers.
"The central bank's interest rate policy is at a point that
could allow us to achieve easily our target of lower rates."
The central bank has taken the same line as the government
for some time even though inflation remains high and cut rates
for the sixth straight month in August despite the threat of
credit rating downgrades after a failed coup attempt in July.
A modest fall in inflation last month due to lower food
prices is seen as giving the central bank leeway to cut interest
rates again this month, although analysts expect inflation to
pick up later in the year.
Year-on-year, consumer prices rose 8.05 percent in August,
exceeding the central bank's year-end forecast of 7.5 percent.
A low and stable inflation environment could make it
possible to lower deposit and loan interest rates, central bank
governor Murat Cetinkaya said on Tuesday in a summary of a
presentation sent by email.
But prices need to stabilise before interest rates can be
lowered and the country needs to make systematic efforts to
tackle high food prices, Cetinkaya also said.
The bank on Tuesday lowered lira reserve requirement ratios
by 50 basis points and increased reserve option coefficients to
provide additional liquidity to the market.
"As room for more cuts on the interest rate corridor narrows
and we progress towards an end, the central bank is supporting
monetary easing with reserve requirements and other tools," said
Muammer Komurcuoglu, an economist at Is Investment.
"The central bank may take similar steps in the coming days,
meaning we could feel the impact of the steps taken even more."
Last month the central bank cut its overnight lending rate,
the highest of the multiple interest rates it uses to set
policy, by 25 basis points to 8.5 percent. It left its benchmark
one-week repo rate unchanged at 7.5 percent.
The bank has said it aims to simplify policy and move to a
Earlier on Tuesday, Finance Minister Naci Agbal said that
Turkey should pursue cautious economic policies in the short and
medium terms, adding that growth in the second quarter had been
more moderate than in the first.
(Reporting by Ercan Gurses, Asli Kandemir, Nevzat Devranoglu;
Writing by Daren Butler and Seda Sezer; Editing by Nick