Turkey’s May rate of inflation was 73.5 percent year on year, the very highest in 23 years, because the country grappled with soaring food and energy costs and President Recep Tayyip Erdogan’s long-running unorthodox monetary policy strategy. Turkey’s consumer indicant rose to 73.5 percent from 70 percent the previous month.
Turkey has experienced rapid climb for years, but Erdogan has consistently refused to lift interest rates significantly to chill the resulting inflation, describing himself as a sworn enemy of interest rates.
As a result, the lira has plummeted and therefore the average Turk has far less spending power. Economic analysts predict that Turkey’s inflation will only worsen. in step with the country’s statistics agency, food prices within the 84-million-person country rose 91.6 percent year on year, highlighting the pain that regular consumers face as supply chain issues, rising energy costs, and Russia’s war in Ukraine feed into global inflation.
Erdogan directed the country’s financial institution, which analysts say has no independence from him, to repeatedly cut borrowing rates last year, despite rising inflation. Central bank chiefs who opposed this course of action were fired; by the spring of 2021, Turkey’s financial organisation had undergone four governors in two years.
Turkey’s president promised to deliver a replacement economic model that may boost export wealth due to a weaker lira, and so combat inflation by closing the country’s long-standing deficit.
That has not occurred, and now the sky-high costs for energy imports that has got to be paid in dollars — plenty more dollars, because of the lira’s weakness — are putting intense pressure on the economy.
“The laser target unconventional measures over conventional monetary policy will unlikely solve the inflation challenge,” Ehsan Khoman, director of emerging markets research for Europe, the center East, and Africa at MUFG Bank, wrote on Twitter after the figures were released. Speaking to CNBC, Khoman added that he expects Turkey’s inflation to “remain north of 70% year on year until November because of a convergence of elevated commodity prices, rising domestic production costs, and a precipitously depreciating lira.”
“Turkey during the 1990s inflationary period.” “Looks like Erdogan has lost his last econ credibility,” tweeted Holger Zschapitz, finance editor at German daily Die Welt. “Erdogan’s unconventional approach to managing the country’s $790 billion economy has continued to backfire,” he wrote in another tweet.
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