Erdogan’s Eccentric Theory of Inflation Scores a Win in Turkey

For years, Turkey’s President Recep Tayyip Erdogan has hawked an eccentric theory that challenged modern inflation-fighting methods: the key to containing prices was lower interest rates, he maintained. For weeks, he has pressured his own independent central bank not to lift borrowing costs. On Thursday, he chalked up a small victory.

The Turkish central bank’s decision to raise its key interest rate just 50 basis points to 12.75 percent, half the consensus forecast, sent the lira into a brief tailspin and confounded more traditionally inclined economists. “Is this a joke?” asked Tim Ash, senior emerging market strategist at BlueBay Asset Management LLC, in London, in a note minutes after the decision.