ISTANBUL—Turkey’s currency crisis deepened after President Recep Tayyip Erdogan defended his policy of demanding lower interest rates despite rising inflation, sparking another selloff of the lira.

The currency hit record lows after Mr. Erdogan said he hoped interest rates would continue to fall until Turkey’s next national election in 2023. The president holds the unconventional view that cutting interest rates is the best way to stop soaring inflation and spur economic growth, a policy most economists say is a recipe for...

ISTANBUL—Turkey’s currency crisis deepened after President Recep Tayyip Erdogan defended his policy of demanding lower interest rates despite rising inflation, sparking another selloff of the lira.

The currency hit record lows after Mr. Erdogan said he hoped interest rates would continue to fall until Turkey’s next national election in 2023. The president holds the unconventional view that cutting interest rates is the best way to stop soaring inflation and spur economic growth, a policy most economists say is a recipe for disaster.

“As I always say, interest rate is the cause, inflation is the result. We are cutting the interest rates now and God willing we will all see that inflation also will drop,” Mr. Erdogan said in an interview with state broadcaster TRT that aired late Tuesday.

The lira hit 13.74 to the dollar around midnight local time before rebounding slightly Wednesday morning.

Turkey’s economy has been in turmoil since earlier this year when Mr. Erdogan fired the previous central-bank governor for raising interest rates.

Central banks usually raise rates to contain inflation. Under pressure from Mr. Erdogan, Turkey’s central bank has cut rates twice despite inflation rising to nearly 20% in October.

The rate cuts, along with Mr. Erdogan’s repeated comments on his unusual economic views, have spurred investors to scale back their exposure to the lira, causing the currency to lose some 40% of its value against the dollar this year.

The free-falling lira has heaped economic pressure on ordinary Turkish people, who are struggling with rising prices of food, fuel, medicine and other essential goods. The government is considering raising the minimum wage to cushion Turks from the effects of the devaluation, a step that could add to inflationary pressures.

Mr. Erdogan’s speeches and interviews have become a feature of Turkey’s economic turbulence as investors react to each new statement from the president in which he defends his economic policies.

On Tuesday, Mr. Erdogan said lower interest rates would eventually lead to a drop in the inflation rate while helping the economy grow.

“It is clear that the latest movement we see in currency rates has no economic basis. Some people are uncomfortable that our country is getting stronger and is coming to a point where it can implement independent policies,” he said.

Turkey’s economy expanded at a rate of 7.4% in the third quarter, according to the government. The return of tourists this year and an improving export sector have provided support to the economy. Economists fear that Turkey’s rampant inflation could eventually overwhelm the rest of the economy if Turks make a run on banks.

Write to Jared Malsin at jared.malsin@wsj.com