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Turkey’s Inflation Surges Nearly 80 Percent in July, and Experts Warn It May Not Yet Have Peaked

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Annual inflation in Turkey rose to a fresh 24-year high in July, as the country’s currency, the lira, continues to weaken and the cost of living surges across the nation, official data showed Wednesday.

The Turkish Statistical Institute said consumer prices rose by 79.6 percent from a year earlier, and were up 2.37 percent month over month.

A Reuters poll had forecast a rise of 2.9 percent month over month, while annual consumer price inflation was forecasted to be 80.5 percent.

According to unofficial data from the independent inflation research group ENAG, Turkey’s monthly consumer price inflation rate increased by 5.03 percent in July, nearly double that of government figures, while annual inflation has increased by 176.04 percent.

Experts and opposition parties to President Tayyip Erdogan have regularly accused the statistical institute of distorting official data for political reasons.

Government data show that the biggest annual rise in consumer prices was in the transportation sector, which was up 119.11 percent, while food and non-alcoholic drinks prices jumped 94.65 percent.

That was followed closely by furnishings and household equipment, which was up 88.35 percent, and alcoholic beverages and tobacco were up 82.66 percent.

Communication was the main group that indicated the lowest annual increase, at 25.79 percent, per the data.

Inflation began to surge in Turkey around autumn 2021, when the Turkish lira declined following the central bank’s decision to impose a 500 basis-point easing cycle as part of what many have called Erdogan’s “unorthodox” approach to monetary policy.

Opponents argue that lowering interest rates will only lead to higher inflation, but the president has not backed down.

Prices Constantly on the Upswing

The cost of living has steadily risen since the lira’s decline, leaving households forking out substantially more for everyday staple items, such that the prices of which can often change on a daily or weekly basis in supermarkets.

Many families in Turkey’s largest city of Istanbul have had to turn to Istanbul Halk Ekmek, or “public bread” kiosks, to get their hands on discounted bread products that are cheaper than at bakeries across the city.

That is despite the government announcing a significant reduction in taxes on basic food supplies in February in an effort to fend off inflation.

Inflation has been further fueled by the economic impact of Russia’s invasion of Ukraine, which has hit hard a country that relies heavily on imports for things like energy, and the costs of which have soared since February.

Critics of Erdogan say that his monetary policy is to blame for the current economic crisis in Turkey.

“If this monetary policy continues, it will be impossible to get ahead of inflation,” Ogeday Topcular, a money manager at RAM Capital SA in Geneva, told Bloomberg on Aug. 3. “Turkey’s monetary policy is unsustainable.”

Turkish economist Selva Bahar Baziki this week said that “unanchored expectations and a weakening lira are feeding further into prices,” adding: “We don’t expect the central bank to tighten interest rates in response to ever-rising inflation—instead, the political leadership is calling for even lower rates.”

Jason Tuvey, senior emerging markets economist at Capital Economics, told Reuters on Wednesday that annual inflation may be reaching its peak, but that it will likely “remain close to its current very high rates for several more months.”

However, a forecast range chart accompanying the government’s latest inflation report shows that price growth is set to peak closer to 90 percent during the September–October period.

The latest data come as Erdogan and his Justice and Development Party (AKP) are facing falling popularity ratings ahead of the general election scheduled for June 2023.

Katabella Roberts

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Katabella Roberts is a reporter currently based in Turkey. She covers news and business for The Epoch Times, focusing primarily on the United States.





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