Mustafa Mughal Turkish President Recep Tayyip Erdogan vowed that the central bank would continue to cut its policy interest rates every month for as long as he stayed in power, after it surprised markets by cutting rates twice in the last two months.
“As long as this brother of yours is in this position, the interest will continue to fall with each passing day, each passing week, each month,” he told a rally in the western province of Balikesir.
Inflation has surged since November last year, as the lira slumped following cuts to the policy rate by the central bank, in an unorthodox easing cycle long sought by Erdogan.
Inflation Rate on its peak after cutting interest rates
Turkish inflation accelerated last month to a level last seen in mid-1998, fueled by an experimental central bank policy that has chased away foreign investors and eroded the lira’s value.
Consumer prices rose 83.5% on an annual basis in September, according to data released on Monday by Turkey’s statistics agency, in line with the median forecast in a survey. Monthly inflation quickened 3.1%, slightly less than expected in a separate poll.
Price index that excludes volatile items speeds past 68%. The acceleration follows a series of interest-rate cuts this year by central bank Governor Sahap Kavcioglu that threaten to pile even more pressure on inflation.
The surprise policy turn has made Turkey an outlier among global monetary authorities, most of which are aggressively tightening to get a grip on price increases.
As a result, Turkey has the world’s deepest negative interest rates when adjusted for inflation, depriving it of a buffer to protect local assets against a selloff. The lira has lost more than 50% of its value against the dollar in the past 12 months.
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