The Turkish government’s policy of boosting exports by keeping the lira cheap will not help Turkey lower inflation, the Turkish business association Tusiad said.
According to chairman Orhan Turan, that tactic would have worked in the 1990s, but the world has changed. The weaker lira actually encourages inflation, Turan said. That’s because Turkey imports a lot of stuff.
Turkish inflation was above 60 percent in March. Despite this, the Turkish central bank has not raised interest rates for months, which is the conventional approach to inflation. At the end of last year, the central bank even cut interest rates, even though they were already rising.
“Turkey is not tackling inflation adequately, is not adopting the right monetary policy and is not taking the structural steps necessary in, for example, agriculture,” Turan said. “That way, we cannot arm our economy against global shocks.”
Turkish President Recep Tayyip Erdogan believes that high-interest rates cause high inflation. In recent years, he had repeatedly intervened at the central bank when policymakers disregarded his opinion. Nevertheless, criticism of the policy is only sporadic, partly because the president takes a firm look at critics.
