Turkey’s Central Bank lowered its policy rate by 100 basis points to 14% Thursday, delivering a fourth cut in as many months in line with President Recep Tayyip Erdogan’s unconventional view that high interest rates cause high inflation, even as prices continue to soar amid the ongoing freefall of the Turkish lira.

In a sign of deepening mistrust in Ankara’s economic management, the lira tumbled past 15 versus the dollar Thursday, hitting record lows. The currency was already in a tailspin in anticipation of the rate cut, losing some 10% of its value this week alone.

The four rate cuts since September, totaling 500 basis points, have pushed real yields deep into negative territory. Annual consumer inflation hit 21.3% in November, according to official data, which itself is widely disputed as unreliable. No matter how hard Ankara might be trying to camouflage inflation, dizzying price increases on goods such as food, automobiles and energy that have major weights in the inflation basket threaten to propel the annual consumer inflation rate to 32% in December, which would mean real yields sinking to -18% and the economy deeper into uncharted waters.


Written by Mustafa Sönmez