Dec 13 2017

Turkish growth unsustainable without inflation battle: ex-bank chief

Turkey’s government must tackle inflation if the country’s economy is to grow in a sustainable way, said Durmuş Yılmaz, former governor of the central bank.

Inflation is eroding the value of the lira, pushing Turks to invest in dollars, much like they did prior to the financial crisis of 2001, Yılmaz said, according to Hürriyet newspaper.

Battling inflation is one of the prerequisites to sustainable growth. We wiped six zeroes off the lira in 2005, but now 100 new lira is worth 35. When money loses its value, dollarisation occurs. It seems like we didn’t take any lessons from the 2001 crisis.

Turkey’s central bank needs to raise rates to tackle price increases, but the measure would just bring short term relief without structural reform, he said.

The central bank's monetary policy committee will meet in the capital Ankara on Thursday to consider raising interest rates. Economists are predicting an increase to the late liquidity window rate of 100 basis points to 13.25 percent. President Recep Tayyip Erdoğan has warned against rate increases, saying they stoke inflation.

Consumer price inflation accelerated to 13 percent in November. Producer price increases held steady at 17.3 percent.