Status: 03/03/2022 12:31 p.m
Currency devaluation in Turkey continues to accelerate. The rate has now climbed to over 50 percent. Inflation has not been this high for more than 20 years.
Consumer prices in Turkey rose by 54.4 percent in February compared to the same month last year. This was announced by the national statistical office today. This is the highest level in more than 20 years. The expectations of experts were even exceeded. Economists surveyed by the Reuters news agency had only expected an increase of 53 percent.
trend is accelerating
In January, the increase was still around 49 percent. In a monthly comparison, consumer prices increased by 4.8 percent; Energy, household appliances and food in particular rose in price. With the latest inflation data, the trend of the past few months is continuing at an accelerated pace, also because the Turkish central bank recently lowered its key interest rate to 14.0 percent, well below the level of inflation.
According to experts, this monetary policy, which was supported and even explicitly demanded by President Recep Tayyip Erdogan, contributed significantly to the fact that the national currency, the lira, had depreciated massively by 44 percent against the US dollar last year – and this despite the fact that the Turkish central bank repeatedly favored the LIra intervened in the foreign exchange market and sold the country’s foreign currency reserves. Due to the currency decline, imports are becoming more expensive because they are usually settled in foreign currencies.
Producer prices more than doubled
The producer prices published at the same time as the consumer prices do not bode well for the further development of Turkish consumer prices. According to the statistics authority, this price index even increased by 105 percent year-on-year in February. Producer prices show the price development of products that are manufactured and sold in Turkey, for example by industry. They also affect consumer prices at a later stage in the economic process.
In addition, the almost unchecked rise in the oil price should also ensure further price pressure in Turkey. “Spillovers from the Russia-Ukraine crisis, including higher global commodity prices and potential new supply chain disruptions, argue for upside risk,” commented economist Jason Tuvey of Capital Economics.