Turkey's Erdogan says he lowered inflation to 4% before, will do again

Turkey's Erdogan says he lowered inflation to 4% before, will do again
President Erdogan of Turkey has multiplied speeches to defend his economic policy despite a collapsing exchange rate of the Turkish lira to the US dollar.
2 min read
19 December, 2021
The Turkish lira's exchange rate to the dollar has been collapsing over the past few weeks. [Resul Kaboglu/NurPhoto via Getty]

ANKARA, Dec 19 (Reuters) - President Tayyip Erdogan said he had lowered Turkey's inflation to around 4% before and that he will achieve that again soon as annual price rises hit 21% 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% next year.

The lira hit a record low beyond 17 against the U.S. dollar on Friday following fears of an inflationary spiral. At the low, the lira had lost some 55% of its value this year, including 37% in the last 30 days.

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% 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% in 2011, before beginning to gradually edge upwards from 2017. It jumped 3.5% in November to 21.3% annually.

On Thursday, Erdogan announced a 50% 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 centre, 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."