Pedestrians walk in the Mahmutpasa district, one of Istanbul’s largest textile shopping malls, near the Grand Bazaar in Istanbul on November 24, 2021.
OZAN KOSE | AFP | Getty Images
Turkey’s annual inflation rate has risen to a 20-year high of 48.7%, state data revealed on Tuesday, despite months of assurances from President Recep Tayyip Erdogan that the soaring numbers were only temporary and that his government could ease the pain for Turks. burdened by rising cost of living.
Consumer prices rose 11.1% in January compared to the previous month, according to the Turkish Statistical Institute, higher than analysts’ forecasts, which ranged between 9% and 10%.
The Turkish lira lost 44% of its value in 2021 on a route driven by Erdogan’s refusal to raise interest rates as inflation rose steadily. The turbulence of the currency has hit the Turks hard as the value of their wages fell and the cost of goods and energy rose dramatically. The president has prioritized credit and exports, while consistently arguing – against all economic orthodoxy – that raising interest rates is actually exacerbating inflation rather than taming it.
Turkey’s central bank has lowered interest rates by 500 basis points since September to 14%.
“The results of Erdogan’s failed monetary policy experiment,” Timothy Ash, senior emerging markets strategist at BlueBay Asset Management, wrote in a note following the Inflation Report.
“Hard to see how CBRT [Turkish central bank] “can cut inflation when it is unable to raise interest rates, and Erdogan will be focused on trying to get credit growth back on track to increase its pre-election popularity.”
Turkish Finance Minister Nureddin Nebati told the Nikkei news agency on Wednesday that he predicted that inflation would remain below 50%, peaking in April.