Erdogan says interest rate increases over amid Turkish lira's recent gains
Turkish President Recep Tayyip Erdogan announced on Friday that his country will no longer increase interest rates to curb inflation, claiming moves made on Monday had reversed the country's currency's woes within just a day.
"We've put aside the classical understanding of economics that keeps inflation under control with high interest rates," the president asserted, according to news agency Bloomberg.
Ankara will work to boost its economy with investment, job creation, increases in exports and other techniques, Erdogan explained, speaking on TV ahead of a private meeting with officials and economic experts on the country's financial future.
Erdogan added: "We've seen that the currency bubble disappeared in one day with the package of measures.
"We will witness a different economic climate through summer once the financial stability is ensured."
The package Erdogan is referring to from Monday included a scheme designed to protect lira bank deposits against changes in the currency's value.
Since it came into force, the lira has shot up in worth, though the currency is still worth 67 percent less against the US dollar than it was in late 2017, before Turkey's combined debt and currency value crisis began.
Turkey's standard interest rate has been cut repeatedly and heavily by its central bank, starting in September.
The president has supported the effort, though it caused the Turkish lira to nosedive.
Despite this, Erdogan has not faltered from his position, promising the nation he will encourage mass-scale investment by keeping borrowing costs down.
He believes when borrowing is more expensive it boosts inflation since businesses offload their losses to everyday people. This understanding is rejected by economists.
The call comes amid an unprecedented slide in the Turkish lira, while Musk is known for advocating crypto alternatives to fiat national currencies, most famously Dogecoin. However, this was not broached in the meeting. 👇https://t.co/qu9WLIxnfQ— The New Arab (@The_NewArab) December 17, 2021
Even with the improvements to the lira's value this week, it is nevertheless worth around a quarter less than when interest began being dropped.
Erdogan's comments on Friday follow a drop in backing for his governing Justice and Development Party as the economic pain of coronavirus took its toll. Turkey's next elections are in 2023.
With inflation having risen to over 21 percent last month, the president is at risk of losing a core constituency – those less well-off citizens who cannot afford a jump in the cost of living.