Consumer prices in Turkey rose the fastest in 24 years in August. Goods and services rose in price by an average of 80.21 percent compared to the same month last year, the statistics office announced today. Compared to the previous month, the cost of living increased by 1.46 percent. It is the 15th consecutive monthly increase in inflation.
Expensive raw materials drive inflation
Transport costs, including gasoline prices, increased by 117 percent last month. Food and non-alcoholic beverages rose in price by more than 90 percent. Consumers also had to dig deeper into their pockets for furniture and household appliances: they cost an average of 92 percent more than in August 2021.
An important reason for the currently sharply rising prices are the consequences of the Russian war against Ukraine, which has made many raw materials significantly more expensive. As a country poor in raw materials, Turkey is dependent on imports, so the higher prices are reflected in consumer prices.
The weakening lira rate is having an aggravating effect here because raw materials on the world markets have to be paid for in dollars. So if the lira falls, the costs also increase: the weak lira makes imports, on which Turkey depends, more expensive.
peak in autumn
The national currency has lost 44 percent of its value against the dollar in the past year and a further 27 percent so far this year. The reason for this is that the central bank has gradually lowered its key interest rate from 19 percent to the current 14 percent since last autumn, although economic textbooks actually recommend interest rate hikes when prices are rising sharply. Falling interest rates make a currency less attractive to investors.
President Recep Tayyip Erdogan wants to boost the economy with low interest rates. According to forecasts by the Turkish central bank, inflation will peak in the autumn, with inflation rates approaching 90 percent. According to a government forecast, the inflation rate should then fall to 65 percent by the end of the year. By the end of 2023, it should then fall to almost 25 percent, according to a forecast published on Sunday.
Can you trust the data?
According to surveys, many Turks do not believe the official statistics. According to this, every second person is of the opinion that prices will rise even more sharply than officially reported. Opposition politicians and some economists do not trust the official data either. "I don't believe them anymore," said investment strategy manager Tim Ash from asset manager BlueBay Asset Management. "It looks like fantasy, wishful thinking. How can you make economic policy when you can't trust the economic fundamentals?"
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