Consumer prices rose by 83.45 percent in September on an annual basis, up from 80.2 percent in August, Sozcu newspaper reported on Monday, citing TUIK, the Turkish state statistics agency.
Erdogan maintains the unorthodox belief that high borrowing costs lead to higher prices, which opposes established economic theory. The Turkish leader last year launched an unorthodox economic experiment, attempting to bring down chronically high inflation by slashing interest rates. The move plunged the country into a fresh economic crisis, prompting the lira to slump, losing 44 percent of its value against the U.S. dollar in 2021 and roughly 28 percent this year.
Turkey’s central bank has delivered two consecutive 100 basis point cuts over the last two months, contradicting global economies that are raising rates to control prices and Erdogan has called for the bank to further slash rates in its next policy meeting slated for October 20.
The Turkish lira hit a new record low of 18.56 against the U.S. dollar after Monday’s inflation reading, Reuters reported.
The new rate was fuelled by transportation prices rising by 117.66 percent, food up more than 90 percent and housing prices climbing by more than 80 percent, the agency said.
Turkey is now experiencing its sharpest inflation surge since World War II, Hakan Kara, the former chief economist of the Turkish central bank, said on Twitter.
The economist said the record-breaking was inevitable in light of the government's unorthodox policies.
Liam Peach, senior emerging markets economist at London-based Capital Economics, pointed to the large hike in electricity and gas prices as prompting inflation higher in Turkey.
"We think inflation will rise a bit further but with President Erdogan calling for further easing the central bank is likely to deliver another interest rate cut this month," Reuters cited the economist as writing in a note to clients.
Erdogan on Wednesday called for the central bank to continue cutting its main interest rate to below 10 percent by year-end, in a move that defies investors and economists who say rate increases are needed to tame inflation raging above 80 percent, Bloomberg reported.
The Turkish president went on to say he hopes the monetary authority will deliver further reductions to the policy rate in October and beyond, so that the benchmark reaches single digits by the end of the year.
According to a nationwide measure for inflation published by ENAG Group, an independent body of Turkish academics, Turkey’s actual inflation increased to 186.27 percent in September year-on-year.
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