Turkey's central bank on Thursday bucked global trends once again and kept its benchmark interest rate stable despite one of the highest levels of consumer price increases in the world.
The decision at a monthly policy meeting came two weeks after President Recep Tayyip Erdogan -- a lifelong opponent of high interest rates -- denied that Turkey had an "inflation problem".
Turkey's official annual rate of consumer price increases has edged above 70 percent and is on course to keep breaking records last set in the late 1990s.
Independent estimates by Turkish economists suggest the real figure could be substantially higher.
The inflationary spiral has decimated Turks' living standards and helped push Erdogan's public approval ratings to one of the lowest levels of his two-decade rule.
But Erdogan has vowed not to raise rates before a general election due in June 2023.
"We do not have an inflation problem. We have a cost-of-living problem," Erdogan said this month.
The central bank blamed higher prices on "temporary" global factors and kept its policy rate at 14 percent for the sixth month in a row.
Economists warn that Ankara's refusal to join most other countries in raising rates to fight the spike in food and energy prices caused by Russia's invasion of Ukraine could see the Turkish lira collapse.
"High inflation, falls in the lira and aggressive monetary tightening elsewhere are clearly not enough to persuade Turkey's central bank to lift interest rates," Capital Economics said in a research note.
"Disorderly falls in the lira are a major risk, which would probably be met with capital controls rather than rate hikes."
The lira has lost half its value against the dollar in the past year alone.
Those losses have accelerated in the past few weeks despite indirect market inteventions and other currency support measures that have depleted state reserves to their lowest point of Erdogan's rule.
- Disbelief -
Economists struggle to understand how Erdogan's government intends to combat consumer price increases in the runup to next year's vote.
Erdogan argues that high interest rates cause inflation -- the opposite of conventional economic beliefs that more expensive borrowing brings down prices by slowing down spending and dampening demand.
The pious Turkish leader also notes that charging interest violates Islamic rules against usury and that his policies will make Turkey into a global production engine that thrives on cheap exports.
But the lira's depreciation has made Turkey's dependence on energy and commodity imports much more expensive to maintain.
Turkish economists suspect the government may try to circumnavigate Erdogan's ban on interest rate hikes by trying to rein in spending in other ways.
"They may try to cool the economy by further tightening credit conditions," University of Economist and Technology's associate professor Atilim Murat.
"But we have seen in the past eight to 10 months that it is not possible to reduce inflation through these measure," he said.
Foreign economists are even more blunt.
OANDA trading platform analyst Craig Erlam said Erdogan was conducting a dangerous economic "experiment at arguably the worst moment in decades" because of soaring global inflation rates.
"This is like saying that I am going to drink a bottle of vodka because my doctor tells me I have liver disease, but I know better even though I have no medical qualifications," BlueBay Asset Management analyst Timothy Ash quipped in a note.
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