ANKARA, Turkey: In December, Turkey's annual inflation rate reached a 19 year high of more than 36 percent, underscoring the country's financial turmoil and alarming policies of President Tayyip Erdogan.
Turkey has gone the other way because of the central bank raising interest rates to help control inflation, as Erdogan prioritizes exports over currency stability, leading to a collapse of the lira's value.
The lira lost 44 percent of its value against the dollar last year, and fell another 5 percent this week, before recovering to trade flat, which has resulted in the price of inflation-fueling imports, such as energy and the raw materials Turkey's manufacturers turn into exports.
According to Erdogan, interest rates are the mother and father of all evil, which has used more unorthodox policies to try to control prices, including intervening in foreign exchange markets.
Turkey was going through a transformation in economy and rising to the next league, and is reaping the fruits, especially in the exports of our country's efforts and hard work in the past 20 years to bolster our foreign trade, Erdogan said in a speech this week.
An economist predicted inflation could reach as high as 50 percent by spring if Erdogan's policy is reversed, but noted that the central bank was unlikely to act.
Ozlem Derici Sengul, founding partner at Spinn Consulting in Istanbul, said Rates should be immediately and aggressively hiked because this is urgent, as quoted by the BBC.
The central bank has cut rates to 14 percent from 19 percent since September, while the cost of living is expected to rise further, especially after recent surges in electricity and gas bills of some 50 and 25 percent.
In October, the bank predicted that the bank would end the year at 18.4 percent, despite the fact that temporary factors have been driving up prices. The official inflation target is 5 percent, but the actual rate has remained in double digits for the past two years.
Erdogan launched a plan three weeks ago to stop the lira's fall, sparking a 50 percent rally, with support from the central bank.
But the lira fell again last week, prompting Erdogan to call for the public to keep their savings in lira and deposit their gold in banks.