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Turkey’s inflation hits 24-year high, CPI rises nearly 80% annually

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Inflation in Turkey has reached multi-decade highs as the policies implemented by President Tayyip Erdogan continue to weigh on the country’s economy.

The consumer price index (CPI), a measure of inflation, rose 78.62% annually and 4.95% monthly in June, according to a July 4 report. Press release by the Turkish Statistical Institute. This is the highest annual inflation rate since September 1998, when it reached 80.4%. On a monthly basis, transport costs increased by 10.59%, accommodation by 8.34% and food and non-alcoholic beverages by 2.09%.

Transportation increased the most on an annual basis, with an increase of 123.37%. Next come food and non-alcoholic beverages at 93.93%, furniture and household equipment at 81.14%, hotels, cafes and restaurants at 79.55%, housing at 75.09% and alcoholic beverages and tobacco at 70.99%.

In an interview with Reuters, Witold Bahrke, senior macro strategist at Nordea Asset Management based in Denmark, ranked Turkey as being in a class of its own when it comes to inflation in emerging markets. He blamed the lack of a credible policy response.

Inflation is a general problem for [emerging markets]. And in Turkey you end up with a toxic mix because we also have a political problem, Bahrke said, adding that he expects the pound to weaken further. Last year, the lira lost 44% of its value against the US dollar. This year, it’s down 21 percent.

Erdogans policies

Although Turkey faces the same inflationary pressures as other countries, Erdogan’s policies are said to have deepened the crisis, driving down the value of the lira and making imports more expensive.

As central banks in major countries raise interest rates to fight inflation, Erdogan instructed the country’s central bank in September to cut rates. Since December, Turkey has maintained interest rates at 14%. Erdogan defended his financial policy, saying lowering rates would boost exports and reduce inflation.

Last month, Erdogan said Turkey would continue to lower interest rates rather than raise them despite the high cost of living. The president expects inflation to come down to appropriate levels by February or March next year.

Given the imbalances, a soft landing for the economy looks like the best-case scenario, but getting there won’t be easy or desirable before the election, said Emre Akcakmak, Dubai-based senior consultant for East Capital.Reuters.

Barclays expects inflation in Turkey to peak at around 88% on an annual basis in October and then slow to 67% by the end of this year.

Naveen Athrappully

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Naveen Athrappully is a reporter and covers world affairs and events at The Epoch Times.

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