"high Inflation Can Be Lowered By High Interest Rates"

- High inflation could be lowered by implementing tight monetary policy, supported by high interest rates, said Erdem Başçı, Governor of Central Bank of Turkey, despite rate-cut pressures from the President and the government.

"Both high inflation and deflation are detrimental to growth" Başçı said in a meeting, odrganised by the Institute of International Finance (IIF) in Istanbul, on Monday.

"The best contribution to growth from a central bank would be to maintain price stability. Reforms in human capital, labor market, technology, innovation and physical infrastructure are going to boost the growth potential in Turkey" he added.

He said, high inflation could be lowered by tight monetary policies supported by high interest rates, that could be implemented at any time. "In 70s, during the oil prices soaring, the inflation in the US rose to double digit levels. Paul Volcker, the Governor of Federal Reserve then, launched a swift tight monetary policy by lifting interest rates and the inflation fell within e year."

Basci said, economic growth in Turkey would be accelerated, if they would be able to lower the inflation towards 5.0 percet target. "We then will be able to lower the target below 5.0 percent" he added.

Turkey’s central bank governor has been under pressure over interest rates, by Turkish President Tayyip Erdoğan, by ministers of the government and by other politicians from ruling AKP.

"It is called an independent board, but this is where we end up. We have to be at a better place, we have to succeed in this" Erdogan said in a speech last week, after the Central Bank statement, saying that it would not hold an emergency meeting to cut rates.

"Interest rates are what shape inflation. If you keep the rates high, the inflation will be high too but if you cut it, inflation will also fall. There are still people who don't understand this" he said.

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