Erdogan on Lira's Instability

President Tayyip Erdogan expressed satisfaction with the decrease in the lira's instability, assuring that the government is working on measures to increase interest in the Turkish currency.

“Slowly, gradually, and without rushing, the lira will rise, interest rates will similarly decrease, and 2022 will be our brightest year,” he stated, as reported by Turkish media.

This month, the lira has stabilized following a 44 percent drop against the dollar last year. At 12:03 GMT, it was trading 1 percent weaker at 13.56 to the dollar, slightly widening its losses after Erdogan's remarks.

“We are very pleased with the decrease in exchange rate instability. Our additional efforts to maintain stability in financial markets and increase interest in the lira are ongoing,” he remarked.

“I believe that interest rates are the cause, while inflation is the result. This outcome is indeed felt; inflation is on the brink of decline,” Erdogan reiterated his unconventional view on the connection between interest rates and inflation.

However, last month, annual inflation rose to 36.1 percent, the highest during Erdogan’s 19 years in power. Economists forecast that inflation could reach 50 percent in the first half of the year. The rise in inflation is attributed to the depreciation of the lira.

The currency's weakness is tied to the Central Bank's decision to cut interest rates by 500 basis points to 14 percent since September.

On December 20, following a record drop of 18.4 against the dollar, Erdogan announced a support scheme for the lira, offering lira-denominated deposit accounts that would compensate depositors for losses incurred due to the currency's further weakening.