PremiumPresident Recep Tayyip Erdogan has been defiant of an economic theory on how the problem is best tackled. Instead of letting Turkey’s central bank raise interest rates to tighten the money supply, he browbeat it into doing exactly the opposite
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Inflation in Turkey soared to a 20-year high of 48.7% in January. While inflation risk is a global concern, the latest price flare-up is largely its leader’s own making. President Recep Tayyip Erdogan has been defiant of an economic theory on how the problem is best tackled. Instead of letting Turkey’s central bank raise interest rates to tighten the money supply, he browbeat it into doing exactly the opposite. Last year, as prices began to spiral up, he pointed to high capital costs as a cause and demanded that lending rates be pushed down, with dark hints dropped about “usury", which duly made central bankers roll their eyes but also chimed with popular sentiments of faith.
Since July 2019, three central bank chiefs have been bundled out by the populist leader, and, just days ago, he sacked the state statistics agency’s head. Perhaps they saw it coming: a rate drop led to a foreseeable crash in the Turkish lira, as money fled the country into foreign currencies far likelier to retain their value, which in turn made imports dearer and inflation worse. Yet, he seems unfazed in his bizarre approach, throwing even more money at a crisis of too many liras chasing too few goods and services.
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