Istanbul (AFP) - Turkish President Recep Tayyip Erdogan on Thursday announced the third major minimum wage hike in a year to try and combat a historic jump in consumer prices ahead of crunch elections.

More than 40 percent of Turkey’s workforce earns the lowest income allowed by law.

Erdogan relied on support from the working classes to rise to power nearly two decades ago – and will need it again to secure re-election in polls which are due by next June.

But Turkey’s poor have been hit the hardest by an economic crisis that has seen the official annual inflation rate reach 85 percent.

On Thursday the Turkish leader said the country would boost the monthly take-home pay to a minimum of 8,500 liras ($455).

The minimum wage stood at 2,826 liras in December 2021, which at the time was slightly less than $300.

It was raised to 4,253 liras last January and then to 5,500 in July.

Turkey’s latest economic crisis started when Erdogan – a lifelong opponent of high interest rates – pressured the central bank to bring down chronically high consumer prices by lowering borrowing costs.

Conventional economic theory urges policymakers to fight inflation by curbing demand and raising the price of doing business through higher interest rates.

Erdogan’s approach set off a currency crisis that saw the lira lose nearly half its value in a matter of weeks late last year.

The government has responded by spending its reserves on currency support measures and imposing complex economic rules aimed at bringing inflation under control.

Erdogan promised on Thursday that inflation will slow to 20 percent by the end of next year.

“We will witness a rapid decline of inflation rates starting this month,” he said in televised remarks.

The central bank was expected later Thursday to keep its benchmark interest rate at nine percent.

Turkey’s official inflation rate of 84.39 percent means that banks lose 75.39 percent of a loan’s value if they lend money for a year at the official interest rate.