Turkey’s central bank cut interest rates for a third straight month on Thursday, despite a falling lira and an annual inflation rate that has risen to over 83 percent.

Turkey’s monetary policymakers are bucking the global trend of central banks raising interest rates to fight inflation as high lending rates cool the economy and prices.

The latest decision comes after President Recep Tayyip Erdogan said the central bank will cut interest rates every month “as long as I am in power” – despite annual inflation hitting 83.45 percent in September.

Erdogan aims to cut interest rates to single digits by the end of the year as he prioritizes economic growth eight months ahead of general elections – which could promise to be the closest since he came to power nearly two decades ago.

Turkish politicians have insisted on following this unconventional economic model at the cost of astronomical inflation.

The central bank on Thursday said it cut its one-week repo rate to 10.5 percent from 12 percent, saying a rise in consumer prices was “due to the delayed and indirect impact of rising energy costs” caused by Russia’s war in Ukraine.

The rate cut was widely expected, but the 150 basis point cut was larger than expected after two 100 basis point moves in both August and September.

The bank hinted that the easing cycle would end next month.

“The (monetary policy) committee assessed taking a similar step and ending the rate-cutting cycle at the following meeting,” the bank said.

Liam Peach, senior emerging markets economist at London-based Capital Economics, said this forecast “seems like an admission that cutting interest rates is hardly the right thing to do when inflation is so high.”

“But at the same time it would bring interest rates to 9 percent and satisfy Erdogan’s desire to cut rates into single digits,” he added.

Inflation started to rise around the world after economies emerged from Covid lockdowns, but it worsened this year as Russia’s invasion of Ukraine pushed up energy and food prices.

Erdogan, a vocal opponent of higher borrowing costs, has called high interest rates his “biggest enemy”.

Earlier this month, he vowed that while he remains in power, “interest rates will continue to fall by the day, by the week, by the month.”

As a result, the Turkish lira continues to depreciate against the US dollar, falling 28 percent since January.

“Erdogan’s economic re-election strategy is clear… Use money from Russia and (the) Gulf to fund foreign exchange interventions to defend the lira, lower interest rates as much as possible to jump-start credit and growth,” Timothy said , an analyst at BlueBay Asset Management, said Ash.

Turkey’s powerful leader has responded to the economic crisis by revising its foreign policy and restoring ties with its former rivals in the Arab world, including oil-rich Saudi Arabia.

Additional trade-oriented deals with Russia have helped shore up Turkey’s dwindling foreign exchange reserves and potentially give Erdogan enough breathing room to weather the economic storm leading up to the June elections.

However, Washington has been warning Turkish companies and banks trading with Russia of possible sanctions for several months.

Elizabeth Rosenberg, the US Assistant Secretary of State for Terrorist Financing and Financial Crimes, traveled to Ankara and Istanbul this week, the Treasury Department said.

Their meetings “reaffirmed the importance of a close partnership between the United States and Turkey in addressing the risks posed by sanctions evasion and other illicit financial activities.”