Erdogan Says He’s Resolved to Cut Rates, Build Istanbul Channel

The Turkish government is determined to bring down interest rates and inflation to single digits, President Recep Tayyip Erdogan said, sounding more eager than his new central banker to lower borrowing costs.

The Turkish president also said he intends to expedite his controversial plan to dig a strait bisecting Istanbul to bypass the busy Bosphorus Strait linking the Black and Marmara seas.

“We are determined to bring inflation, which has recently accelerated, down to single digits,” Erdogan said, addressing lawmakers of the ruling AK Party in Ankara on Wednesday. “We are also determined to reduce interest rates to single digits.”

The lira’s recent depreciation has no economic basis, the president added.

Erdogan spoke a week before the central bank holds its first rate-setting meeting under its new governor, and the lira extended its decline. The currency has weakened 12% against the dollar since Naci Agbal was fired as head of the monetary authority on March 20 and replaced with Sahap Kavcioglu.

Kavcioglu, a former AK Party lawmaker, has repeatedly said he won’t rush to cut the benchmark rate from its current 19%.

The multibillion-dollar Canal Istanbul project, first announced a decade ago, became a prominent issue over the past week after more than 100 retired admirals whom he’s accused of trying to incite a coup against him expressed concern about the project. They say they’re worried the giant project will impact a 1936 treaty that governs the Bosphorus and is meant to ensure stability in the Black Sea region.

“We’ve completed preparations for Canal Istanbul to a great extent,” Erdogan said, predicting the project will create a new city of half a million people. “The tender will be held soon and we’ll break ground in the summer.”

Shares of state-run REIT Emlak Konut rose as much as 4.7% after his comments, while Akcansa Cimento AS, a partnership between HeidelbergCement and Sabanci Holding, climbed as much as 9.9%.

Erdogan has said Turkey won’t exit the treaty but sees the Canal Istanbul as an alternative to it.

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