Turkish Erdogan says he cut inflation to 4% before and can do it again

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Turkish President Tayyip Erdogan addresses the audience as he attends a ceremony in Istanbul, Turkey, December 19, 2021. Murat Cetinmuhurdar / Presidential Press Office / Document via REUTERS

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  • Erdogan reiterates his opposition to high interest rates
  • Is under fire from collapsing currencies and rising costs
  • President says problems are not due to low interest rate policy
  • Economists forecast inflation above 30% next year

ANKARA, December 19 (Reuters) – President Tayyip Erdogan has said he has lowered Turkey’s inflation to around 4% previously and will do so again, as it rose above 21% following a pressure for aggressive interest rate cuts he designed.

Erdogan said the policy, which collapsed the country’s pound, was part of a successful “war of economic independence”.

He says it will boost exports, jobs, investment and growth, but most economists call it reckless and predict inflation will exceed 30% next year.

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The lira hit a record low above 17 against the dollar on Friday. Hit by fears of an inflationary spiral, the currency has lost 55% of its value this year and 37% in the past 30 days.

In a meeting with young Africans on Saturday which aired on Sunday, Erdogan reiterated his unorthodox view that interest rates push prices up, adding that inflation is hopefully expected to come down soon. .

“Sooner or later, just as we lowered inflation to 4% when I took office, we will lower it again. But I will not let my citizens, my people, be crushed by interest rates,” Erdogan said.

Annual inflation fell to around 4% in 2011, when Erdogan was prime minister. It has been up slightly since 2017 and jumped in November by 3.5% over the month and 21.3% over the year.

Many Turks have said that a 50% increase in the minimum wage announced by Erdogan on Thursday – and widely supposed to raise consumer price inflation by 3.5 to 10 percentage points – would be insufficient.

Speaking on Sunday, Erdogan said Turkey’s problems were due to “unreasonable attacks” on the economy and dismissed calls for capital controls as “ridiculous.”

“The limited rate cuts we have made cannot be the cause of this image,” he said.

Exchange rates were “the weapon of the game against Turkey,” and once they stabilized, along with prices, “we will see the doors of a much larger, modern Turkey open to us within a few months “.

RISING CRITICISM

Under pressure from Erdogan, the central bank has cut rates by 500 basis points since September. He says the model will boost exports, jobs, investment and growth.

Turkey’s largest business group, TUSIAD, on Saturday called on the government to abandon the low interest rate policy and revert to “the rules of economics”.

Opposition parties want an immediate election, but Erdogan, in power for 20 years, has rejected the call. National elections are scheduled for mid-2023. Read more

On Sunday, he called TUSIAD’s statement an attack on the government.

“Our government’s economic policy is progressing exactly as we have determined, with the exception of temporary exchange rate volatility,” he said. “I call on all of my citizens to stand more firmly alongside their state and government on the economy.”

Thousands of people demonstrated over the weekend in Istanbul and the southeastern city of Diyarbakir against the soaring cost of living.

Some ferry lines operating from and to Istanbul were halted on Sunday due to unsustainable costs resulting from the pound crash, operators said.

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Additional reporting by Umit Bektas and Yesim Dikmen in Istanbul and Umit Ozdal in Diyarbakir; Writing by Tuvan Gumrukcu; Editing by Andrew Cawthorne and John Stonestreet

Our Standards: Thomson Reuters Trust Principles.


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