President Recep Tayyip Erdoğan on Wednesday said his newly appointed Treasury and Finance Minister Mehmet Şimşek would take coordinated steps swiftly with the central bank, but stressed that it was a mistake to suggest he had changed his own views on interest rates.

Appointments Seen as Tighter Interest Rate Policy

Since winning reelection last month, Erdoğan has appointed Şimşek, who is highly regarded by financial markets, as well as a new central bank governor, Hafize Gaye Erkan, a former senior U.S.-based bank executive, in moves seen as heralding a switch to tighter interest rate policy.

Low Inflation and Low Interest Rate Policy

“Some of our friends should not be mistaken, such as (asking) ‘Is our president going for a serious change in interest rate policies?'” Erdoğan told reporters on a return flight from Azerbaijan. “But upon the thinking of our treasury and finance minister, we have accepted that he will take steps swiftly, comfortably with the central bank,” he said.

Erdoğan said he is determined to lower inflation, which dropped to just below 40% in May, to single digits, adding that he maintains his “low inflation, low interest rate” policy.

Monetary Stimulus Over the Last Several Years

The government has urged monetary stimulus over the last several years, aiming to achieve price stability by slashing borrowing costs, boosting exports and flipping chronic current account deficits to surpluses.

Şimşek’s Remarkable Reputation

Şimşek, 56, won the markets’ confidence during terms as finance minister and deputy prime minister between 2009 and 2018. In his first remarks after the appointment, he said the country has no choice but to return to “rational ground” in terms of economic policies.

Şimşek pledged to increase predictability and accelerate the structural transformation. He said fiscal policies and structural reforms would support Türkiye’s central bank to help lower inflation.

Positive Results Expected

Erdoğan said he told the new central bank governor about his expectations. “God willing, neither our finance minister nor our central bank governor will embarrass us and I think we will hopefully obtain positive results,” he told reporters.

First Woman at the Helm of Türkiye’s Central Bank

A former co-CEO at First Republic Bank and managing director at Goldman Sachs, Erkan is the first woman at the helm of Türkiye’s central bank, taking over from Sahap Kavcıoğlu, who spearheaded the easing drive that saw the monetary authority slashing its benchmark policy rate to 8.5% from 19% in 2021.