Turkey to reduce inflation to single digits, Erdogan says

Turkey’s economic programme is bearing fruit in terms of production, employment and exports, Turkish President Tayyip Erdogan said on Saturday in a video message to mark the Eid al-Adha holidays.

“Turkey will get good results on inflation starting from the second half of the year,” Erdogan said, adding inflation will definitely be reduced to single digits, reports Reuters.

“We will wait for the fourth quarter” in order to see full relief from high inflation, Sabah newspaper cited Erdogan as saying on the plane after a visit to Spain.

“We are keeping a firm grip, but in the end it comes down to interest rates. Hopefully we will bring inflation to a more favorable level in the fourth quarter with the steps we will take on interest rates,” Erdogan said.

Erdogan is speaking publicly about interest rates for the first time since he gave into a policy pivot and allowed a team of technocrats to take the helm of monetary policy, reports Bloomberg.

While the president didn’t elaborate on what those “steps” could be, he has in the past espoused the benefits of low interest rates and often advocated the unorthodox view that cheaper money leads to slower inflation.

Erdogan’s push for an ultra-loose monetary policy between 2018 and May 2023 that prioritised economic growth and fueled cheap money led to an inflation crisis and left the country’s currency vulnerable to a selloff. Following last year’s presidential elections, he appointed a more market-friendly team of economic officials, led by former Wall Street banker Mehmet Simsek. Since then the central bank has raised its policy rate to 50% from 8.5%.

Inflation accelerated to an annual 75.5% in May and has likely peaked, data showed earlier this month. Policymakers anticipate Turkey’s inflation will end the year at 38%, which would still leave it as the world’s sixth-fastest, according to the International Monetary Fund.