Declaring yet again that “interest is the cause, inflation the effect,” President Erdogan on Friday doubled down on his crusade against conventional monetary policy, even as Turks grapple with one of the world’s fastest-rising price levels.
Addressing a Global Islamic Economy Summit in Istanbul, Erdogan boasted of his credentials as an “economy expert” but offered few clues on how Turkey will escape the havoc unleashed by his own unorthodox rate-cutting experiments. Those cuts triggered a currency spiral and pushed annual consumer inflation above 70 percent last year, wiping out household savings and slashing real wages.
“I will keep fighting the interest-based order,” he said, branding the current system “illegitimate” and blaming it for global inequality. The president’s rhetoric was a thinly veiled swipe at the Central Bank of the Republic of Turkey—even though he spent years pressuring it to slash borrowing costs, a move economists widely blame for today’s crisis.
Erdogan nevertheless promised to stick with the disinflation plan drawn up by Finance Minister Mehmet Simsek, saying the programme has already made “noteworthy progress.”
Critics note that progress has come only after the central bank was forced to reverse course and jack rates up to 55 percent, effectively admitting that the president’s earlier policies were self-inflicted wounds.
Despite Erdogan’s vow to deliver single-digit inflation, analysts say the target is a fantasy so long as the self-proclaimed maestro of economics keeps treating orthodox interest-rate policy as a personal enemy.