For now at least, a coincidence of favorable data and timing would appear to vindicate Erdogan’s assault on economic orthodoxy, which holds that borrowing decreases when interest rates rise, curbing inflation as consumers spend less. Turkey’s president believes the opposite is true, and lower rates bring price growth down.
Thanks to a more stable lira, weak demand after recession, and distortions from year-on-year comparisons, Turkish inflation could soon be in single digits for the first time in over two years. And the central bank will almost certainly oblige on Thursday with a rate cut of as much as 4 percentage points, according to some analysts surveyed by Bloomberg. Most see a reduction of 275 basis points to 17%.