(Bloomberg) -- Turkey will keep interest rates low after elections in May, the country’s finance chief said, rejecting the view of some Wall Street banks that expect a U-turn in its unconventional monetary policy.

The central bank will keep cutting rates as inflation slows and maintain them at low levels, Treasury and Finance Minister Nureddin Nebati told Bloomberg in an interview late Wednesday, saying this was in line with his country’s new economic model.

“The idea that the president will raise rates is no longer possible. As long as I am here,” there’ll be no reversal in Turkey’s monetary policy, Nebati said in the Turkish capital, Ankara. “Our president will not compromise on this.”

Erdogan Pledges Rate Cuts in Bid for Pre-Election Economic Boost

Banks including JPMorgan Chase & Co. and Goldman Sachs Group Inc., have said a rate hike is likely, because Turkey will be forced to seek external funds to finance its growing current-account deficit.

But Nebati’s comments highlight a growing gap between investors’ expectations and the outlook of the government under President Recep Tayyip Erdogan. Turkish officials say consumer inflation will cool from historic highs and that the lira will remain stable, enabling a continuation of current policies.

By cutting rates as inflation surged to more than 85%, Turkey became a global outlier as central banks around the world embarked on the most aggressive and synchronized monetary policy tightening in 40 years in response to price shocks.

Turkey’s policy, by contrast, defied convention with abrupt easing cycles in 2021 and 2022, even as inflation accelerated.

Why Turkey’s Next Election Is a Real Test for Erdogan: QuickTake

Erdogan remains one of Turkey’s most popular political leaders despite price rises that have hit millions of Turks. But polls suggest a tight race against opposition candidates, who promise a more conventional policy mix, including higher rates to curb inflation.

JPMorgan and Goldman Sachs both predict the benchmark interest will have to rise to 30% in the third quarter, or more than triple its current level. Nebati said the opposite. 

“After the elections, we enter a much easier period with tourism income rising and food inflation slowing due to the summer,” he said.

Erdogan’s reelection could provide a predictable political environment where foreign investors will seek to buy Turkish assets after they exited the nation’s debt and stocks market at a record pace, he added. 

“After elections, foreign investors will say it is time to head to Turkey,” he said.

“A country that does not have high rates, but is safe, has managed to emerge from a significant crisis that the world faced,” Nebati said. “There is excitement in markets to head to Turkey after elections.” 

The lira has been relatively stable over the past 12 months, despite having lost 28% of its value against the dollar. 

But signs are emerging that more pressure is building. Traders ultimately expect volatility to come back and the lira to weaken. Options are pricing in an almost 60% probability that the Turkish currency will slump 25% to a new low of 25 against the dollar by the end of the year.

--With assistance from Beril Akman.

(Adds quotes and context)

©2023 Bloomberg L.P.