Turkey's President Recep Tayyip Erdogan still believes he's right, and most of the rest of the world is wrong, when it comes to fighting inflation.
In an exclusive interview with CNN on Thursday, Erdogan promised to continue cutting interest rates to tackle soaring prices if he is re-elected on May 28, my colleague Olesya Dmitracova reports.
"Please do follow me in the aftermath of the elections, and you will see that inflation will be going down along with interest rates," he told CNN's Becky Anderson Thursday. Asked whether that meant there would be no change in economic policy, he replied: "Yes. Absolutely."
Erdogan narrowly failed to win 50% of the votes cast in Sunday's election but performed better than polls predicted and has momentum going into the runoff vote at the end of the month.
Why it matters: Investors have already been unnerved by the prospect that he might extend his 20-year rule: Turkish stocks tumbled Monday and the Turkish lira slumped to a new record low against the US dollar.
The currency crashed by more than 40% last year as Erdogan's economic policies fueled a jump in inflation.
"I have a thesis that interest rates and inflation, they are directly correlated. The lower the interest rates, the lower the inflation will be," Erdogan told CNN.
As price hikes started to accelerate around the world in late 2021, Erdogan ordered Turkey's central bank to slash interest rates. The annual rate of consumer price inflation hit 85% last October, before slowing to 44% in April.
"President Erdogan's unexpectedly strong showing in Turkey's presidential election on Sunday means that a return to orthodox policymaking looks as far away as ever," James Reilly, an assistant economist at Capital Economics, said in a note on Monday. "As a consequence, the Turkish lira looks set to remain under serious pressure this year."
Runaway prices have hurt the Turkish economy as it struggles to recover from a devastating earthquake in February.
"Turkey will need to curb inflation, safeguard financial stability, and put the economy on a path of sustainable growth regardless of the results of the elections," JPMorgan analysts noted on Monday, adding that the outlook for the country would depend on the extent to which it shifted back toward the economic mainstream. "If policies are shifted to greater orthodoxy, the disinflation process will be faster."
Comments
Post a Comment