Turkey’s central bank has said it will adjust its monetary policy this month, raising hopes it will finally increase interest rates.
Independent experts say an interest rates hike is needed to keep the currency from falling and fuelling a financial crisis.
The bank’s decision came after official figures showed that the annual inflation rate in Turkey jumped to 17.9% in August from 16% in July. That is the highest since 2003, when President Recep Tayyip Erdogan came to power.
The central bank, which will next meet on September 13 to set rates, has come under pressure from Mr Erdogan to refrain from raising interest rates.
Higher rates can hinder economic growth, but are also needed to control inflation and support the currency.
The Turkish lira has plunged some 40% against the US dollar so far this year over concerns about Mr Erdogan’s economic policies and a spat with the United States over the detention of an American pastor on espionage and terror-related charges. Washington imposed sanctions and threatened new ones unless the pastor is released.
The currency was 1.2% lower on Monday, trading at 6.61 lira per dollar.
The currency drop is particularly painful for Turkey because it has accumulated a high debt in foreign currencies.
The president has blamed Turkey’s woes on foreign powers, particularly the United States, which he says is waging an “economic war”.