Turkey’s Central Bank. (Photo credit: Hurriyet Daily News)
Annual inflation in Turkey is expected to reach 68 percent in April, deepening the cost-of-living crisis in many households.
Soaring prices are part of an economic crisis exacerbated by the Russia-Ukraine conflict, which has driven up the cost of gas, oil, and grain.
Annual consumer price inflation was 68 percent in April with forecasts ranging between 64.20 percent and 70.85 percent, the Turkish Statistical Institute reported on 28 April.
The biggest annual increase in costs was in the transportation sector, at 99.12 percent.
Turkey’s rampant inflation comes as a result of a series of aggressive interest rate cuts last year, in line with President Recep Tayyip Erdogan’s opposition to high borrowing costs.
The unorthodox strategy is part of a bid to prop up growth, investment, and exports, according to Erdogan. Contrary to established economic thinking, the president insists that high rates cause inflation.
The Central Bank cut rates by 5 percentage points between September and December, but they have remained unchanged this year at 14 percent.
“Inflation will stay close to these high levels until the very final months of this year, but the central bank and, crucially, President Erdogan seem to have no appetite for interest rate hikes,” the London-based Capital Economics announced on 3 March.
Reports in January indicated that over recent months Turkey’s central bank made nearly $20 billion in foreign reserve sales to uphold the Turkish lira, which lost 44 percent of its value against the US dollar in 2021, plunging to a record low of 18.41 liras against the dollar in December.
The performance of the currency has stoked inflation in Turkey’s import-dependent economy.
In February, food prices increased by eight percent, marked by a 31 percent increase in vegetable prices. Meanwhile, annual food inflation hit 64.4 percent.
Russia and Ukraine supplied 80 percent of Turkey’s $4 billion grain imports last year, and any price hikes would push up consumer inflation.
The government said inflation will drop with a new economic program which provides tax cuts on basic goods and adjusted electricity prices, in an attempt to soften the blow to households.