By Enyichukwu Enemanna
Turkish President Recep Tayyip Erdogan has said despite soaring inflation at over 80%, the central bank will keep cutting interest rates, saying that he expects the country’s key rate, currently 12%, to hit single digits by the end of this year.
Erdogan who spoke to CNN on Wednesday also took the time to throw some jabs at the UK, saying that the British pound has “blown up.”
The UK currency recently hit a historic low against the US dollar at close to $1.03, as the new Conservative government led by Prime Minister Liz Truss put forward an economic plan based on borrowing and tax cuts despite mounting inflation, sending markets reeling.
This has prompted alarmed reactions from US economists, policymakers and the International Monetary Fund, with some saying the UK is behaving like an emerging market.
Turkey’s official currency, Lira, meanwhile, hit a record low of 18.549 against the dollar on Thursday. The currency has lost roughly 28% of its value against the dollar this year and 80% in the last 5 years as markets shunned Erdogan’s unorthodox monetary policy of cutting interest rates despite high inflation.
“Oh the irony, Erdogan giving Truss advice on the economy,” Timothy Ash, an emerging markets strategist at BlueBay Asset Management, said in an email note.
“Turkey has 80% inflation and I guess the worst performing currency over the past decade. Lol. How low the U.K. has sunk.”
Erdogan doubled down on his controversial monetary plan on Thursday, saying that he told central bank decision-makers to continue lowering rates at its next meeting in October.
“My biggest battle is against interest. My biggest enemy is interest. We lowered the interest rate to 12%. Is that enough? It is not enough. This needs to come down further,” Erdogan said during an event, according to a Reuters translation.
“We have discussed, are discussing this with our central bank. I suggested the need for this to come down further in upcoming monetary policy committee meetings,” he added. Turkey’s central bank shocked markets with two consecutive 100 basis point cuts in the last two months, as many other major economies seek to tighten policy.
The lira meanwhile is set to fall further as Turkey prioritizes growth over tackling inflation, which is at its highest in 24 years. In addition to the skyrocketing living costs this has brought on Turkey’s population of 84 million, the country is burning through its foreign exchange reserves and has a widening current account deficit.