Turkey’s core inflation hits 13-year high

Erdogan blames interest rates

ISTANBUL, Oct 3, (RTRS): Turkey’s core inflation spiked to a 13-year high last month, data showed on Tuesday, prompting President Tayyip Erdogan to blame interest rates for fuelling price growth, reiterating an unorthodox stance that has unnerved investors.

Inflation remains one of the Turkish economy’s most pressing problems. While the central bank has said it will stick to tight monetary policy, Erdogan - who has described himself as an “enemy” of interest rates - has called for lower rates to boost credit growth and spending.

Core inflation, which excludes energy, food and other volatile prices, rose to 10.98 percent year-on-year in September, data from the Turkish Statistical Institute showed, the highest level since February 2004.

“We still have not been able lower inflation and this is due to interest rates,” Erdogan said in a speech to deputies from his ruling AK Party in Ankara, after the data was released.

“The fall in interest rates is unfortunately not at the level we would like. If we can’t achieve this, many troubles await us. We must solve this,” he said.

Erdogan’s belief that inflation is caused by interest rates is at odds with orthodox economics, which views rates as an important tool to keep prices in check.

Erodogan’s comments have prompted concern that the central bank is less than independent and faces political pressure from Erdogan. The bank last month left its highest policy rate, known as the late liquidity window, unchanged for the third straight meeting.

The rise in inflation comes as Turkey’s domestic economy has recovered from the downturn that followed last year’s failed coup, helped by a raft of government stimulus measures. The economy expanded at a break-neck pace of 5.1 percent in the second quarter.