Turkish Lira Plunges To All-Time Low But Erdogan Stays Firm On Interest Rates Saying That As A Muslim He Will Only Follow Koranic Decrees

Rejecting calls by country's business community to abandon the economic policies he is pursuing, Turkey’s president Recip Tayyip Erdogan has said there was no going back on his unorthodox policy of lowering interest rates, even as the lira continued to plunge to reaching record low against the dollar.

The lira today tumbled to an all-time low of 18.25 against the dollar — some 10% weaker from Friday’s close. Turkey’s currency has dropped by 58% since the beginning of the year and fell by 5% on Monday (Dec 20) alone.

The country's Industrialists’ and Businessman’s Association (TÜSİAD) government has been urging Erdogan to return to the "rules of economic science". Erdogan however has continued to wage a war on interest rates despite opposition parties and businesses urging him repeatedly to tame inflation and stabilise the currency.

"Sooner or later, just as we lowered inflation to four percent when I came to power... we will reduce it again," Erdoğan said while addressing a Turkey-Africa summit that concluded on Saturday (Dec 19).

"I won’t let my citizens, my people, be crushed by interest rates," Erdogan said while launching a blistering criticism on the business community for asking him to pursue conventional economic policies.

During another speech on Sunday (Dec 19), Erdogan said “As a Muslim, I will continue to do whatever the religious decrees require,”

Erdogan has previously fired a number of central bank governors who have not agreed with his unorthodox belief that high interest rates cause inflation instead of helping combating it.

In conventional policy making, if facing a rising inflation then a country's central bank needs to increase interest rates to drive price increases down again. The higher the inflation, the higher rates need to go to combat it.

Erdogan has often sought to justify his decision quoting verses from the Koran which strictly forbids interest.

Erdogan has once described interest rates the "mother and father of all evil."

"I cannot stand by those who defend interest," he once said.

Even though official figures show that annual inflation has accelerated to 21%, the Central Bank has cut a key interest rate by 5 percentage points — to 14% — since September.