World-renowned economist Steve Hanke measures Turkey's annual inflation rate as 138 percent

World-renowned economist Steve Hanke has commented on Erdoğan's pledge to lower Turkey's inflation rate to 4 percent, by saying that the Turkish president "must be dreaming." Hanke said that he measures Turkey's inflation rate as 137.7 percent per year.

Monday December 20 2021 07:21 pm

Duvar English

Steve Hanke, an economics professor at Johns Hopkins University, has criticized Turkish President Recep Tayyip Erdoğan's unorthodox economic policies after the latter vowed to lower Turkey's inflation rate to 4 percent.

"He must be dreaming. Today, I measure Turkey's inflation at 137.76%/yr, more than 6x the phony official rate. In the real world, interest rates follow inflation," Hanke wrote on Twitter.

Pres. Erdogan has pledged to lower Turkey's inflation to 4%/yr. He must be dreaming. Today, I measure Turkey's inflation at 137.76%/yr, more than 6x the phony official rate. In the real world, interest rates follow inflation.https://t.co/3att3ZrO2o
— Steve Hanke (@steve_hanke) December 19, 2021

Erdoğan has been staunchly defending his unconventional hypothesis that reducing interest rates will lead to lower inflation. He has been claiming that the inflation rate will decrease by the next elections in the face of his government's low interest rate policy, which is puzzling for many economists.

Once again on Dec. 19, Erdoğan defended his economic policy and likened the currency volatility to attacks on the country's economy that have roots in 2013 nationwide protests, which began in Istanbul's Gezi Park over access to green space.

"We're lowering interest rates. Don't expect anything else from me. As a Muslim, whatever (Islamic teaching) requires I will continue to do that," he said, referring to Islamic finance in which high interest, or usury, is typically avoided.

Despite widespread criticism and the rapid fallout for the economy -- including Turks' fast eroding incomes and savings -- Erdoğan has forged ahead with his so-called new economic programme that prioritises exports and lending.

Under pressure from the president, the central bank cut rates again last week by 100 points, sending real rates deeper into negative territory, a red flag for investors and savers.

Inflation jumped to 21% last month and is expected to pass 30% next year.

The lira has lost more than half of its value this year and is by far the worst performer among peers for three years running, due largely to damaged monetary credibility, analysts say.

In an attempt to slow the selling and address what it called "unhealthy" prices, the central bank has intervened five times this month. Bankers' calculations show it has sold more than $6 billion from its already depleted foreign reserves.