Turkey’s Erdogan plans to take greater control of economy …
ISTANBUL (Reuters) - Investors hammered Turkeys lira on Tuesday, sending it to a record low after President Tayyip Erdogan said he plans to take greater control of the economy after next months election, deepening concerns about his influence on monetary policy.
Erdogans comments, in an interview with Bloomberg Television in London, reinforced long-standing worries about the central banks ability to fight double-digit inflation amid the presidents drive for lower interest rates.
He said the central bank, while independent, would not be able to ignore signals from the new executive presidency that comes into effect after the June polls. A self-described enemy of interest rates, Erdogan wants borrowing costs lowered to fuel credit and new construction.
I will take the responsibility as the indisputable head of the executive in respect of the steps to be taken and decisions on these issues, he said in the interview broadcast on Tuesday.
Turkey has called snap presidential and parliamentary elections for June 24 and polls show Erdogan as the strongest candidate to win the presidential vote. Turks narrowly backed a switch to an executive presidency in a referendum last year. That change is due to go into effect after the vote.
Erdogan's comments helped pushed the ailing lira TRYTOM=D3 to a fresh record low of 4.4604 against the dollar, bringing its decline this year to more than 14 percent.
It clawed back some of its losses after one of his advisers, Cemil Ertem, said the central bank had the independence to use all the tools at its disposal.
Yields on 10-year government bonds TR10YT=RR briefly touched their highest since at least January 2010.
To view a graphic on Lira and emerging market currency performance, YTD, click: reut.rs/2wGQ5cm
Centralization of power and interference in the monetary policy is a concern to us, said Dietmar Hornung, an associate managing director and head of European Sovereigns at ratings agency Moodys, at a conference in London.
However, Erdogans economic adviser Ertem said the reduction of rates was a general target, rather than a specific aim of the banks next rate-setting meeting on June 7 - comments likely designed to take some pain off the lira.
President Erdogans emphasis is not directed towards June 7. What the president says is that interest rates should be reduced as a target, he told Reuters.
Erdogan said citizens would ultimately hold the president responsible for any problems generated by monetary policy.
They will hold the president accountable. Since they will ask the president about it, we have to give off the image of a president who is effective in monetary policies, he said.
This may make some uncomfortable. But we have to do it. Because its those who rule the state who are accountable to the citizens, he said.
He also said Halkbank (HALKB.IS) executive Mehmet Hakan Atilla, who was found guilty by a U.S. court of helping Iran evade U.S. sanctions, was innocent and Turkey wanted his acquittal.
If Hakan Atilla is going to be declared a criminal, that would be almost equivalent to declaring the Turkish Republic a criminal, he said.
To view a graphic on Turkey inflation and central bank funding, click: reut.rs/2rhsMkh
Additional reporting by Marc Jones in London; Writing by Daren Butler and David Dolan; Editing by Janet Lawrence
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