Turkey’s central bank on Thursday cut its benchmark interest rate again by 1.5 percentage points, from 12% to 10.5%, for the third month in a row, despite inflation above 83%, CNBC and news.ro reported.

Analysts had expected a 1 percentage point decline, so the measure still managed to surprise many, despite the increasing regularity of interest rate cuts in Turkey.

Consumer price growth in the country of 84 million people hit a new 24-year high of 83.45 percent in September, although many people living in Turkey say prices for basic goods have in some cases tripled over the past year.

The country’s monetary and credit policy, led by Turkish President Recep Tayyip Erdogan, is based on supporting economic growth and export competitiveness, not on curbing inflation.

Erdogan actively supports the unorthodox idea that rising interest rates fuel inflation, not the other way around, and has called rising interest rates “the mother of all evils.”

The policy has drawn constant criticism and consternation from economists and has played a major role in the sharp weakening of Turkey’s currency, the lira, which has lost about 28 percent of its value against the dollar this year.

The Turkish lira was little changed after hitting an all-time low on the news at 18.615 per dollar. The currency has fallen over the past year by 50% against the US dollar.

While Turkey’s current account deficit narrowed in August thanks to tourism receipts, it still stands at $3.1 billion, according to Goldman Sachs.

“The lira remains weak, real yields are artificially understated, inflation has accelerated, and the current account remains in deficit. This has forced international investors away from the Turkish local currency bond market in recent years,” Daniel Wood, portfolio manager at William Blair Investment Management, wrote in a note on Thursday.

The Turkish government used alternative strategies to strengthen its currency, including incentive programs for bank lira deposits, selling dollars for lira, which depleted the country’s foreign exchange reserves, and receiving investment and aid from wealthy Gulf countries to finance its currency interventions.

Ankara also maintains friendly relations with Moscow, attracting waves of Russian millionaires and billionaires in an effort to avoid Western sanctions.

Electoral strategy?

Timothy Ash, senior emerging markets strategist at BlueBay Asset Management, says everything depends on winning Turkey’s next general election in July 2023.

“These pro-growth policies may well win Erdogan the election, but they will increase import demand, undermine competitiveness and will undoubtedly widen the current account deficit significantly,” he said in an email to clients.

But Erdogan remains determined to lower the country’s interest rate to single digits by the end of this year.

“My biggest struggle is against vested interests. Interest is my biggest enemy. We have reduced the rate to 12%. Enough? It’s not enough. It is necessary to lower even more,” said the president during the event at the end of September.

Turkey’s central bank announced another interest rate cut in November, but it could be its last, saying financial conditions should continue to support growth amid weakened demand. It added that the slowdown in external demand and pressures on manufacturing were being “closely monitored” and that “policy options for lending, guarantees and liquidity will continue.”