Turkish consumer prices rose more sharply in April than they have seen since the end of 2022. And inflation is likely to continue to rise in the short term. Nevertheless, the central bank left the key interest rate unchanged.
Inflation in Turkey continued to rise in April. As the statistics office announced today, goods and services cost an average of 69.80 percent more than last year.
This is the highest rate since the end of 2022. Analysts had expected an average of 70.1 percent, after the inflation rate in March was 68.50 percent.
Key interest rate at 50 percent
From March to April, prices rose by around 3.2 percent alone. The education sector, hotels, cafes and restaurants, health, transport and alcoholic beverages and tobacco were particularly affected.
Despite stubbornly high inflation, the central bank left its key interest rate at 50 percent last week. This is below the inflation rate. The real key interest rate is therefore negative, which, according to many experts, stimulates rather than slows down economic activity – and thus inflation.
Weak lira exacerbates the problem
The negative real interest rate is also seen as an important reason for the weak national currency, the lira, as it makes a financial investment in Turkey appear less attractive for foreign investors. The lira exchange rate is near record lows against both the dollar and the euro. The weak national currency makes imported goods and services more expensive and thus fuels inflation in the country.
The Turkish monetary authorities assume that the inflation rate could reach its peak in May at 73 to 75 percent. At the end of the year it should only be around half as high at 36 percent.
Most recently, the central bank said it would keep an eye on inflation risks: “The tight monetary policy stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed and inflation expectations move closer to the forecast range.”