Turkey Fighting Against Unholy Trinity in Economy, Erdogan Says

Turkey is waging war against a “devil’s triangle” of interest rates, inflation and exchange rates, President Recep Tayyip Erdogan said on Saturday, a day after the lira hit a fresh low.

“Our response to those who work to besiege our country in the economic sphere is a new war of economic liberation,” Erdogan said, addressing supporters in the eastern city of Van. He said the government has carried out a “grand structural change” as important as the abolishment of concessions granted to Western powers by the Ottoman Empire, which were voided by the creation of the Turkish Republic.

Erdogan’s speech follows the lira weakening to a record low of 8.3849 per dollar on Friday. The currency has depreciated 29% this year, heading for its eighth consecutive year of decline, the longest losing streak since 1982.

The central bank has tightened policy in recent months, tweaking funding costs this week after making a surprise 2 percentage-point increase in its benchmark rate in September. Erdogan advocates an unorthodox theory that high interest rates cause rather than curb inflation.

Inflation is expected to accelerate to 12% in October from 11.75% the previous month, according to the median estimate in a Bloomberg survey of 15 analysts. The central bank’s inflation target is 5%.

©2020 Bloomberg L.P.

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