ISTANBUL (Reuters) - Turkish inflation, which has surged to nearly 18 percent, will fall to single digits, President Tayyip Erdogan was quoted as saying by Hurriyet newspaper on Wednesday, although he did not explain what would drive inflation lower.
He also said Turkey would overcome a currency crisis that has seen the lira TRYTOM=D3 lose some 43 percent against the dollar this year.
The sell-off was initially sparked by investor concerns over the central bank’s ability to rein in double-digit inflation, with Erdogan calling for cheaper borrowing costs.
“This will go back to single digits again. We’ll get over this,” the president, who says high interest rates fuel inflation, told reporters on a flight back from Kyrgyzstan earlier this week, according to Hurriyet.
“On the issue of investments, foreign investors are not refraining from entering Turkey,” Erdogan said. “We are at a good point in exports. We do not have a problem. We will overcome this, we will succeed.”
The lira stood at 6.6959 at 0925 GMT on Wednesday, close to Tuesday’s close of 6.6930.
Prices jumped 17.9 percent year-on-year in August due to rising energy and food costs, official data showed, the highest inflation since late 2003.
In a statement released shortly after the inflation data, the central bank said its monetary stance would be adjusted at its monetary policy committee meeting on Sept. 13.
Investors have said a sharp rate hike is required but that the central bank might not be able to meet market expectations partly because of Erdogan’s antipathy to higher borrowing costs.
Price increases in September and exchange rate volatility could cause year-end inflation to be around 20 percent or higher and the market is expecting a hike that will bring 4-5 percent real interest on top of that, said Seda Yalcinkaya Ozer of Integral Investment.
The bank’s benchmark interest rate currently stands at 17.75 percent, slightly below the August inflation figure.
“Reactions to an interest rate decision from the CBRT that is different from the market reality could be harsh,” she said.
Reporting by Ezgi Erkoyun, Ali Kucukgocmen and Behiye Selin Taner; Editing by Catherine Evans