ISTANBUL (Reuters): Turkey’s annual inflation rate surged to 36.1% last month, its highest in the 19 years that Tayyip Erdogan has ruled, laying bare the depths of a currency crisis engineered by the president’s unorthodox interest rate-cutting policies.
In December alone, consumer prices took a rare step into double-digits, rising 13.58%, Turkish Statistical Institute data showed on Monday, eating deeper into the earnings and savings of Turks rattled by the economic turmoil.
The year-over-year CPI outstripped a median Reuters poll forecast of 30.6% with staples such as transportation and food – which took increasing shares of households’ budgets during 2021 – rising even faster. read more
Turkey’s lira shed 44% of its value last year as the central bank slashed interest rates under a drive by Erdogan to prioritise credit and exports over currency and price stability. On Monday the currency whipsawed down 5% then up 3%. It stood at 13.0790 versus the dollar at 1734 GMT, some 0.8% firmer than Friday’s close. read more
Some economists predict inflation could reach as high as 50% by spring unless the direction of monetary policy is reversed. Goldman Sachs said it would remain above 40% for most of the year ahead.
“Rates should be immediately and aggressively hiked because this is urgent,” said Ozlem Derici Sengul, founding partner at Spinn Consulting in Istanbul.
The central bank was however unlikely to act, she added, and annual inflation “will probably reach 40-50% by March”, by when administered price rises would have been added into the mix, including a 50% minimum wage hike. read more
Turkey now has the eighth-highest inflation in the world, according to a Trading Economics listing.
Last year was the worst for the lira in nearly two decades, while the annual CPI was the highest since the 37.0% reading of September of 2002, two months before Erdogan’s AK Party first took office.
Erdogan’s focus early on Monday was on trade data which showed exports surged by a third to $225 billion last year.
“We have only one concern: exports, exports and exports,” he said in a speech, adding the trade data showed a six-fold rise in exports during his tenure as leader.
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