Turkey’s Erdogan vows inflation will fall

President Recep Tayyip Erdogan vowed Sunday to rein in inflation decimating Turks’ purchasing power and doubled down on his opposition to high interest rates.

Erdogan has gone against orthodox economic thinking as part of a “war of economic independence”, arguing repeatedly that high rates push up inflation.

“Sooner or later, just as we lowered inflation to four per cent when I came to power... we will reduce it again,” Erdogan said after a Turkey-Africa summit ended Saturday.

“But I won’t let my citizens, my people, be crushed by interest rates,” the Turkish leader said in a meeting with African youths, according to a video released Sunday. God willing, inflation will fall as soon as possible.”

The last time consumer prices reached around four per cent was in 2011, but inflation has steadily risen since 2017.

Under pressure from Erdogan, the central bank has cut the main interest rate by 500 basis points since September.

The bank reduced the rate for a fourth time last week even though the annual inflation rate reached 21.31 per cent in November, with experts predicting another rise this month.

‘Absurd attacks’

The Turkish leader said “nothing else but” cutting rates should be expected in the speech in Istanbul later Sunday.

He also claimed Turkey was coming under “absurd attacks”, and launched a verbal assault on the influential Industrialists’ and Businessman’s Association (TUSIAD).

TUSIAD angered Erdogan after calling Saturday on the government to abandon current economic policies and a return to the “rules of economic science”.

Erdogan has sought lower interest rates to stimulate growth and production and boost exports. But the Turkish lira has taken a battering, losing nearly 40 per cent in value against the dollar since the start of November, with fears of a further devaluation.

The currency crisis has pushed many Turks below the official poverty line, and hundreds took to the streets in protests against the government’s monetary policy in Ankara and Istanbul at the weekend.

But Erdogan pointed to a historic 50-per cent increase approved last week for the minimum wage next year.

There have been concerns that Turkey would need to bring in capital controls after the lira’s plunge, but Erdogan dismissed the speculation as “rubbish”.