Turkey has been suffering from double-digit inflation without interruption since the beginning of 2017, `but it has never reached current levels since President Recep Tayyip Erdogan came to power in 2003.
Last month Turkish inflation accelerated to a level last seen in mid-1998, fueled by experimental central bank policy that scared away foreign investors and eroded the value of the lira.
The economic policy shift made Turkey an outlier among global monetary authorities, most of which are tightening aggressively to rein in price increases.
As a result, Turkey has the world’s deepest negative interest rates when adjusted for inflation, depriving it of a buffer to protect local assets against a sell-off. The lira has lost more than 50% of its value against the dollar in the last 12 months.
Price increases in Turkey
Housing costs experienced the fastest acceleration among the main components of inflation, rising 10% monthly. Annually prices grew 85%.
Energy prices have increased 133% since September 2021. Transportation costs have increased 118% in the same period.
Turkish officials reject criticism that runaway price increases are the result of monetary policy mistakes, instead blaming Russia’s invasion of Ukraine for a global rebound in commodities, including energy and food. . However, even when the impact of such volatile elements is excluded, Turkish annual inflation stood at 68.1% last month.
Experimental policies have already pushed inflation above 100% in parts of the country. Consumer prices in Istanbul, Turkey’s most populous city, more than doubled from a year earlier, according to a retail price index released on Saturday.
Seeking to ease the pain of low-income Turks ahead of elections scheduled for next June, the government raised the national minimum wage twice in one year.
The central bank will hold its next rate-setting meeting on October 20 and release its fourth inflation report of the year a week later.
Source: Ambito
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