Inflation in Turkey at a peak of almost two years – approaching 20%

Turkey’s annual inflation rate climbed more than expected to 19.25% in August, above the country’s central bank target and the highest level in almost two years – according to reports in various news sites around the world, including Bloomberg News and the Turkish daily Sabah. The consumer price index rose by 1.12% in the past month, according to data from the Turkish Bureau of Statistics – Turkstat.
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The Central Bank of Turkey has kept the interest rate at 19% since March and has promised several times to keep it above the level of inflation. However, at a conference of investors held on Wednesday this week, investors said that the bank’s governor, apahap Kavcıoğlu, had not reiterated this commitment, saying they were interpreting it as a change that could pave the way for earlier interest rate cuts. Negative of 25 basis points, which posed another challenge to the central bank. The Monetary Authority said that inflation would follow a volatile path in the short term due to supply and demand factors, and that it would monitor the impact of volatility on monetary policy.
1 View the gallery Erdogan Turkish Lira Turkish Pound Money Banknote TurkeyErdogan Turkish Lira Turkish Pound Money Banknote TurkeyTurkish President Erdogan against Turkish lira banknotes (Photo: AFP, Reuters)
In July, the bank raised its annual inflation forecast to 14.1%, while the bank governor estimated that inflation would fall significantly in the fourth quarter. Analysts estimate that monetary easing is expected to begin in the fourth quarter. Inflation has skyrocketed due to commodity prices, consumer demand after the closure and the devaluation of the pound which has kept import prices high. Food prices jumped by almost 30% in August compared to last year and by more than 3% compared to the previous month. Prices in hotels and restaurants, as well as household products have also jumped. The producer price index rose by 2.77% in August compared to the previous month and recorded an annual increase of 45.52%, according to the data. A Reuters median estimate survey in which 15 economists participated predicted annual inflation to fall to 18.7%. The median forecast for the monthly figure was 0.6%. A Bloomberg survey of 21 analysts indicated a slowdown to 18.75%. “The central bank’s commitment to keep interest rates above inflation is becoming more difficult now (but) we do not think the bank will choose to raise interest rates,” said Haluk Bürümcekçi, founder of Bürümcekçi Consulting. The bank will likely continue to stress that food price hikes are temporary and highlight the lower inflation indices, he said. Bürümcekçi predicted that there would be no interest rate cut this year due to high inflation. Annual inflation stood at 18.95% in July and 17.53% in June over the past four years and is mostly at a double-digit rate.

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