Turkey will continue to cut interest rates, its President Recep Tayyip Erdogan said, despite a rise in inflation exceeding 80%. Turkey's central bank will not raise rates, he told CNN Turk, adding that he expects the country's key rate, currently at 12 percent, to reach single digits by the end of this year, CNBC reported.
Faced with deepening economic problems, Erdogan threw some barbs at Britain, saying the British pound has exploded.
Britain's currency recently hit an all-time low against the dollar of close to 1.03 as the new Conservative government led by Prime Minister Liz Truss put forward an economic plan based largely on borrowing and tax cuts, despite rising inflation.
This has prompted alarmed reactions from U.S. economists, politicians and the International Monetary Fund, with some saying that Britain is behaving like an emerging market.
Meanwhile, the Turkish lira hit a record low of 18.549 against the dollar on Thursday. The currency has lost about 28% of its value against the dollar this year and 80% over the past five years as markets shunned Erdogan's unorthodox monetary policy of lowering interest rates despite high inflation.
Erdogan continued to insist on his controversial monetary plan Thursday, saying he had told central bank decision makers to keep cutting rates at the next meeting in October.
Turkey's central bank has shocked markets with two consecutive 100 basis point cuts in the past two months, while many other major economies are looking to tighten policy.
Meanwhile, the lira will fall further as Turkey prioritizes growth over fighting inflation, which has reached its highest level in 24 years. In addition to the skyrocketing cost of living, the country is burning through its foreign exchange reserves and running a growing current account deficit.
As the U.S. Federal Reserve raises its interest rate and the dollar strengthens, Turkey's many dollar-denominated debts and the energy it imports in dollars will become even more painful to pay.