His controversial position to cut interest rates despite its slump Turkish lira and rising inflation was defended again today, Wednesday (1/12) o Recep Tayyip Erdogan, arguing that the Turkey is on a “risky but right” path in its economy.
“What we are doing is right. “We have followed and are following a plan that is politically risky, but correct,” Erdogan told his parliamentary group. The Turkish Central Bank had earlier announced that it was intervening to stop the fall of the Turkish lira, which within a month it has lost about 30% of its value against the dollar. Yesterday, Tuesday, the Turkish currency had made a new historic dive, losing almost 6% of its value in one day against the dollar and the euro.
Shortly after the intervention of the central bank, the Turkish pound recovered slightly and at 12:40 (Greek time) around 13.10 pounds were exchanged for one dollar and 14.90 pounds for one euro, according to the APE-MPE.
“Our country will never return to the system of exploitation that is based on high interest rates”
“The whole world knows that I am against (high) interest rates. I was never in favor. “I was not yesterday and I will not be tomorrow,” the Turkish president said, insisting on the final nature of his controversial decision to cut interest rates. “Our country will never return to the system of exploitation that is based on high interest rates,” he stressed. Contrary to classical economic theories, President Erdogan estimates that high interest rates favor inflation.
Thus, at the request of the president, the officially independent Turkish central bank reduced its key interest rate again in November (from 16% to 15%) for the third time in less than two months, while Inflation reaches 20% on an annual basis, four times higher than the government’s initial target. Inflation in November, which will be announced on Friday, may be higher than 20%, according to some experts. The Turkish pound has lost since the beginning of the year over 40% of its value against the dollar.