A fierce opponent of high interest rates, Turkish President Recep Tayyip Erdogan on Wednesday defended monetary tightening in order to combat inflation, which is close to 60% over one year in Turkey.
We will get inflation back into single digits with the help of a tight monetary policy, Erdogan said, appearing to back away from his historic stance on interest rates.
We have no doubt that we will achieve our objectives, added the Head of State, who presented Turkey’s new medium-term economic program during a televised speech.
Contrary to traditional economic theories, the Turkish president, re-elected at the end of May, has repeatedly affirmed that high interest rates favor the rise in prices.
Between 2019 and 2021, he had sacked three governors of the Central Bank opposed to his theses.
But faced with the scale of inflation, which accelerated to 58.9% over twelve months in August in Turkey, the Head of State, re-elected at the end of May, left his new Minister of the Economy and the new Governor of the Central Bank revert to more conventional policies.
The Central Bank has thus raised its main key rate from 8.5% to 25% since June, initiating monetary tightening.
Turkey has experienced continuous double-digit inflation since the end of 2019, making the cost of living unbearable for many families.