Status: 04.07.2022 1:07 p.m
Inflation in Turkey rose to its highest level since 1998 in June. The main reason is the extremely weak Turkish lira, which has made imports drastically more expensive.
Inflation in Turkey continues to rise: In June, the cost of living rose to 78.62 percent compared to the same month last year, according to the National Statistics Office in Ankara. It is the highest rate of inflation since September 1998 when it was 80.4 percent. Turkey then struggled for nearly a decade to end chronically high inflation. In the previous month of May, the inflation rate was around 74 percent. Compared to this, consumer prices increased by 4.95 percent.
Transport and groceries in particular rose significantly in June on an annual basis. Transport costs, which include gasoline, for example, increased by 123.37 percent last month. Food and non-alcoholic beverages increased in price by 93.93 percent.
Weak lira drives up prices
The inflation rate in Turkey is driven by several factors. The weak national currency, the lira, has been causing prices to rise significantly for a long time, since goods imported into Turkey are becoming more expensive as a result. The prices of many commodities are also rising, not least because of the Russian attack on Ukraine. Russia and Ukraine are important for Turkey for importing energy sources and grain.
According to many economists, however, the Turkish central bank is not fighting the high inflation with enough determination. In fact, the monetary authorities have eased their monetary policy since last summer. According to current economic theory, an increase in interest rates can counteract inflation.
Turkish President Recep Tayyip Erdogan, on the other hand, argues that high interest rates cause inflation. The central bank follows Erdogan’s line and has so far refrained from raising interest rates, which in turn has further weakened the national currency. It has kept interest rates at 14 percent since January.
Are the numbers correct?
The opposition accuses the government of glossing over the inflation figures and assumes a significantly higher rate. The Istanbul-based inflation research group Enag even put inflation for June at 175.55 percent year-on-year.
Producer costs in Turkey also continued to rise: According to the statistics office, the prices that producers receive for their goods rose by around 138 percent over the year in June. Compared to the previous month, this is an increase of around 6.8 percent. The producer prices usually flow with a time lag and are partly included in the consumer prices.