Turkish inflation passes 83% as Erdogan eyes further rate cuts
Despite a galloping inflation topping 83%, Turkish President Recep Tayyip Erdogan has doubled down on his controversial monetary policy, urging the central bank to cut its policy rate to single digits by the year-end.
Turkish consumer prices rose 3.08% in September as annual inflation hit 83.45%, the country’s statistical institute announced Oct. 3, days after the central bank stunned markets with a second rate cut in two months that brought its policy rate to 12%.
The unprecedented 71.5-percentage-point gap between inflation and the bank’s policy rate is the result of President Recep Tayyip Erdogan’s belief that reducing interest rates helps curb inflation, which is the opposite of what mainstream economic theory says. Going against a global monetary tightening cycle to tame prices, Turkey’s central bank has been cutting rates at Erdogan’s behest since last year, fueling the fall of the Turkish lira. Nevertheless, Erdogan could still come up with ways to argue that his policy is bearing fruit as he seeks to patch up his dropping popular support ahead of elections due in June 2023 at the latest.
