Turkey’s inflation has been fueled by the continuing decline in the lira, as well as the economic fallout from the Russian invasion of Ukraine.
Turkish inflation rose to a new 24-year high of 79.6 percent in July, data showed on Wednesday, as continued weakness in the lira and global energy and commodity costs pushed prices higher. rise, although price increases were below forecasts.
Inflation started rising last fall, when the lira tumbled after the central bank gradually cut its policy rate by 500 basis points to 14 percent in a easing cycle sought by President Recep Tayyip Erdogan.
Month-on-month, consumer prices rose 2.37 percent in July, the Turkish Statistical Institute (TUIK) said, below a Reuters news agency poll’s forecast of 2.9 percent. . Annually, consumer price inflation is forecast to be 80.5 percent.
Jason Tuvey, senior emerging markets economist at Capital Economics, said annual inflation may be peaking, with energy inflation falling sharply and food inflation looking close to peaking.
“Even if inflation is near a peak, it will remain near its current very high rates for several more months,” Tuvey said in a note.
“Sharp and disorderly falls in the lira remain a key risk,” he said.
The largest annual increase in consumer prices was recorded in the transport sector, with an increase of 119.11 percent, while the prices of food and non-alcoholic beverages rose 94.65 percent.
This year’s inflation has been further fueled by the economic impact of the Russian invasion of Ukraine, as well as the continued decline of the lira. The currency weakened 44 percent against the US dollar last year and is down another 27 percent this year.
The lira was flat after the data at 17.9560 against the dollar. It hit a record low of 18.4 in December.
Annual inflation is now at the highest level since September 1998, when it reached 80.4 percent and Turkey was struggling to end a decade of chronically high inflation.
Last week’s Reuters news poll showed annual inflation set to drop to around 70 percent by the end of 2022, tapering from current levels as the base effects of last year’s price rise take effect.
The domestic producer price index rose 5.17 percent month on month in July for an annual increase of 144.61 percent.
The government has said inflation will fall as a result of its economic program, which prioritizes low rates to boost production and exports and aims to achieve a current account surplus.
Erdogan has said he expects inflation to come down to “appropriate” levels by February-March next year, while the central bank raised its forecast for the end of 2022 to 60.4 percent last Thursday from 42.8 percent. previous.
The bank’s inflation report showed that the estimated range of inflation reached nearly 90 percent this fall before tapering off.
Opposition lawmakers and economists have questioned the reliability of TUIK’s figures, claims TUIK has dismissed. Polls show that the Turks believe that inflation is much higher than the official data.