Turkey’s central bank on Thursday lowered the benchmark rate by 1 percentage point, to 12 percent, despite soaring inflation measuring above 80 percent, the Associated Press reported.
The move, which contradicts that of global economies that are raising rates to control prices, sunk the Turkish lira to record lows of 18.38 against the dollar, it said.
The slide of the currency is likely to further hit consumers already facing high energy, food and housing costs.
Turkey plunged into a fresh economic crisis when President Recep Tayyip Erdoğan launched an unorthodox economic experiment nearly a year ago in attempting to bring down chronically high inflation by slashing interest rates. The move prompted the lira to slump, losing 44 percent of its value by the years-end.
The Turkish leader maintains the unorthodox belief that high borrowing costs lead to higher prices, which opposes established economic theory.
In an interview with PBS NewsHour this week, Erdoğan dismissed inflation as a “crippling economic threat,” saying, “There are currently countries threatened by inflation rates of 8 percent and 9 percent. This rate is 80 percent in our country.”
“The market shelves aren’t empty in my country. But today, the shelves are empty even in the US, France and Germany. My citizens can now find all kinds of products they want in the markets,” Erdoğan told the network.
Turkey expects inflation to ease to 65 percent by end of the year, according to government forecasts released earlier this month.
Turkey’s inflation rate increased to 181.4 percent in August from 176 percent in July, according to a nationwide measure for inflation published by ENAG Group, an independent body of Turkish academics. ENAG says it uses virtually the same methods and data set as the statistical institute to calculate inflation.
Most Turks do not believe in official inflation data, opinion polls show.