Tuesday, January 11, 2022

Turkish inflation rate jumps to 30%

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Inflation in Turkey is increasingly out of control, with the rate jumping above the 30-per-cent mark in December to 36.08 per cent year-on-year.

This rate is the highest level in about two decades, the Turkish Statistical Office said in Ankara on Monday.

Analysts were surprised by the strength of the price increase.

They had expected around 27 per cent.

The rate has more than doubled since the summer.

The rise in the cost of living was recently also driven by higher food prices.

From November to December alone, the inflation rate was 13.6 per cent.

Producer prices even increased by 79.89 per cent year-on-year in December.

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The prices that producers charge for their goods are likely to be passed on to consumer prices, at least in part, with some delay.

The rapid decline in the Turkish lira exchange rate, which goes hand in hand with inflation, makes imports of goods into the country more expensive.

In addition, commodity prices on the world market are comparatively high.

This is one of the reasons why the country is in a difficult economic situation, which is reflected in high unemployment.

Turks will also have to cope with significant increases in energy prices in the New Year.

Electricity prices for households rose by about 50 per cent in the New Year, those for high-consumption companies even by more than 100 per cent.

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Gas prices also rose significantly.

The situation has been aggravated for months by the Turkish central bank, which, under pressure from Turkish President Recep Tayyip Erdogan, has recently lowered the key interest rate further and further despite the high inflation.

Central bankers usually fight against galloping inflation with higher key interest rates.

Erdogan, however, is of the opinion, contrary to economic doctrine, that high-interest rates promote inflation.

The Turkish opposition leader, Kemal Kilicdaroglu, again sharply criticised Erdogan.

The “economic genius” in the presidential palace has screwed up everything he has touched, he wrote on Twitter.

The opposition doubts the official inflation figures and even assumes a higher inflation rate.

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On the foreign exchange market, the Turkish lira came under pressure on Monday.

Compared to the dollar and the euro, the exchange rate fell by more than two per cent in the morning.


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