The inflation figures in Turkey for the month of December must have made many people in Turkey wince in horror. Inflation rose by over 36%, which was the highest increase in 19 years. The main driver of inflation is the monetary policy of Turkish ruler Erdogan, who has long pursued a stubbornly low-interest-rate policy, despite ever-increasing inflation figures.
Now Erdogan announced on Saturday that he wants to lower interest rates even further and inflation will fall as well.
Erdogan told his supporters in Giresun province, “You know of my battle with interest rates. We are lowering interest rates and we will lower them. Know that inflation will fall too then, it will fall more.”
The whole issue around interest rates started with a plan by Erdogan to push for economic transformation in the country. What it turned into is a currency crisis that is getting worse and worse. If the interest rates are really lowered even further, the Turkish currency Lira should be kept a close eye. If inflation continues to rise, the next stage could be hyperinflation and the people of Turkey will lose confidence in the lira. That would probably bring the next fiat currency to the fiat graveyard.