(Updates with Erdogan comments, background, details)
ANKARA, Sept 13 (Reuters) - High inflation is a result of the Turkish central bank’s wrong steps, President Tayyip Erdogan said on Thursday, and repeated his opposition to high interest rates hours before a key central bank announcement.
Investors are expecting a rate hike from the central bank but are also concerned that monetary policy is shaped under political influence from Erdogan, a self-declared enemy of high interest rates who argues that inflation is the result of high rates.
“If you say inflation is the cause and interest rates are the result, you don’t know this business,” he told a traders’ confederation. The lira, which was largely flat in early morning trade, fell more than 2.5 percent after Erdogan’s comments.
Erdogan, who has described the lira depreciation as an economic war, said the currency was experiencing “fake volatility” and that Turkey’s recent troubles were the result of manipulation.
He also criticised private banks, saying some had increased their interest rates up to 50 percent. “How can the private sector invest in such high interest rates?” he asked, adding that such margins were only made by drugs dealers.
Turkey’s central bank is expected to raise interest rates on Thursday to support the lira and rein in inflation which hit its highest in almost 15 years in August.
According to a Reuters poll, the benchmark rate is expected to be hiked by between 225 to 725 basis points. Analyst forecasts for the scale of the increase vary widely, as the bank balances concerns over lira weakness with worries about an economic slowdown. (Reporting by Ece Toksabay and Tuvan Gumrukcu Writing by Humeyra Pamuk Editing by Daren Butler and Dominic Evans)