Inflation has skyrocketed in Turkey as official figures from the Turkish Statistical Institute (Tüik) show the country’s inflation rate topped 85.5% year-on-year. The inflation rate in Turkey has risen for 17 consecutive months and last month it reached a 24-year high.
Turkey’s Interest Rate Remains Low, While Inflation Runs Rampant
Turkey, the transcontinental country located in Western Asia has been suffering from financial hardship as the region’s economy is in dire straits. On Nov. 3, 2022, the Turkish Statistical Institute (Tüik) published the country’s official inflation rate figures and stats show the rate reached 85.5% year-on-year.
Reports further indicate that the cost of living in Turkey has risen dramatically and the Tüik report shows that food prices in Turkey climbed 99% higher year-on-year. Housing and rent jumped by 85% for Turkish residents. On Oct. 20, 2022, Turkey’s central bank and Turkish president Recep Tayyip Erdogan cut the region’s benchmark bank rate by 150 basis points (bps).
It was the third consecutive month of cuts according to stats and Erdogan explained in September that interest was an enemy. “My biggest battle is against interest. My biggest enemy is interest,” Erdogan stated in late September. He also noted at the time that the interest rate needs to “come down further” despite the red-hot inflation.
The International Monetary Fund (IMF) has also urged Turkey to raise the country’s benchmark rate. Reports say that delegation was sent from the IMF to Ankara and Istanbul to get people from both the public and private sectors to find a solution to Turkey’s economic turmoil.
“Policy rate cuts in late 2021 added to existing vulnerabilities and were followed by lira depreciation and high inflation,” the IMF said. “The mission recommended early policy rate hikes accompanied by moves to strengthen the central bank’s independence. Such moves would help reduce inflation more durably.
Despite the Turkish Statistical Institute’s official inflation numbers, third-party figures tell a whole different story. Economists stemming from the Inflation Research Group (Enag) detail that Turkey’s annual increase in inflation is closer to 185.5%. Researchers say the Enag Inflation Index has dynamic attributes that adjust more quickly to changes in Turkish consumption habits.
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