Erdogan: We are following a risky but correct path in the economy

Turkey is on a “risky but right” path in its economy, Turkish President Tayyip Erdogan said today, defending his controversial position to cut interest rates despite the Turkish pound’s slump and rising inflation.

“What we are doing is right. We have followed and are following a plan that is politically risky, but right,” Erdogan told his parliamentary group.

The Turkish central bank had announced earlier that it was intervening to stop the fall of the Turkish lira, which has lost about 30% of its value against the dollar in one month.

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.

“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 traditional economic theories, President Erdogan believes that high interest rates are conducive to inflation.

Thus, according to the president, the officially independent Turkish central bank cut its key interest rate again in November (from 16% to 15%) for the third time in less than two months, while inflation reached 20% in 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 more than 40% of its value against the dollar since the beginning of the year.

Source: AMPE