Mon | Dec 11, 2023

Turkey inflation passes 80% after rate cut

Published:Wednesday | September 7, 2022 | 12:06 AM
President of Turkey, Recep Tayyip Erdogan.
President of Turkey, Recep Tayyip Erdogan.

Turkey’s annual inflation passed 80 per cent in August, according to official data on Monday, further hitting consumers facing high energy, food and housing costs.

The Turkish Statistical Institute said consumer prices rose by 80.21 per cent from a year earlier, up 0.6 percentage points from the previous month.

Independent experts say inflation is much higher than official statistics. The Inflation Research Group put the annual rate at 181 per cent.

The central bank unexpectedly cut interest rates to 13 per cent in August despite rising prices, a plunging currency – the lira, and an unbalanced current account. The central bank slashed interest rates by five percentage points between September and December last year. The rate then stayed at 14 per cent until last month.

Russia’s invasion of Ukraine and the lira’s decline have stoked inflation. The lira has plunged over 50 per cent against the U.S. dollar since the central bank began cutting rates.

Economists say rising inflation in Turkey is fuelled by President Recep Tayyip Erdogan’s unorthodox belief that high borrowing costs lead to higher prices – the opposite to established economic theory.

The government says it hopes to lower interest rates to boost production and exports in a bid to reach a current account surplus.