President Tayyip Erdogan said he had lowered Turkey's inflation to around 4 percent before and that he will achieve that again soon as annual price rises hit 21 percent due to his push for aggressive monetary easing that has sent the lira crashing.
Erdogan has said the new policy based on low interest rates was part of a successful “economic independence war”, but most economists call it reckless and predict inflation soaring beyond 30 percent next year.
The lira hit a record low beyond 17 against the US dollar on Friday following fears of an inflationary spiral. At the low, the lira had lost some 55 percent of its value this year, including 37 percent in the last 30 days.
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In a meeting with African youth on Saturday that was aired on Sunday, Erdogan reiterated his unorthodox view that interest rates cause inflation, adding he will not let Turks “be crushed” under high loan rates.
“Sooner or later, just as we lowered inflation all the way to 4 percent when I came to power, we will lower it again, we will make it fall again,” Erdogan said.
“God willing, inflation will begin falling soon.”
Inflation fell to around 4 percent in 2011, before beginning to gradually edge upwards from 2017. It jumped 3.5 percent in November to 21.3 percent annually.
On Thursday, Erdogan announced a 50 percent increase in the minimum wage that is widely expected to boost overall consumer price inflation by 3.5 to 10 percentage points.
Many Turks have said the hiked wage will not be enough against the rising costs of living.
Under pressure from Erdogan, the central bank has cut rates by 500 basis points since September. Erdogan says the model will boost exports, employment, investments and growth.
On Saturday, Turkey's largest business group TUSIAD called on the government to abandon the low rates policy and return to “rules of economic science”.
Ayhan Ogan, an advisor to Erdogan, dismissed that, saying “rules of economic science accept the West as the center, the rest of the world as others”.
“We have torn it apart, we are writing history with national economic and national political policies, and establishing a new world.”
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Major Turkish business group calls for an end to Erdogan’s low-rates policy
