Inflation in Turkey jumps to almost 49 percent

The inflation rate in Turkey, which had recently risen massively, continued to skyrocket in January. The Turkish statistical office reported: consumer prices are 48.7 percent higher than in the same month last year. Inflation has thus reached its highest level since April 2002 .

The inflation rate in Turkey, which had recently risen massively, continued to skyrocket in January. The Turkish statistical office announced that consumer prices are 48.7 percent higher than in the same month last year. Inflation has thus reached its highest level since April 2002.

In Turkey, the rapid increase in inflation has continued in the new year. In January, the inflation rate jumped to just below the 50 percent mark. Year-on-year, consumer prices rose by 48.7 percent, the National Statistics Office said on Thursday in Ankara. After a massive fall in the Turkish lira last year and a sharp rise in the price of important raw materials, analysts had expected the price to jump again.

A year ago, the inflation rate in Turkey was 15 percent. At the end of 2021, inflation began to soar with inflation rates of 21 percent in November and 36 percent in December. Prices in Turkey are also rising sharply in a month-on-month comparison. In this regard, the statistics office reported growth of 11.1 percent for January.

Figures come just days after Erdogan dismissed the head of the statistics agency

The new figures came just days after Turkish leader Recep Tayyip Erdogan sacked the head of the national statistics agency. Erdogan, a declared opponent of high interest rates, replaced the previous head of the authorities, Sait Erdal Dincer, with the former deputy head of the Turkish banking supervisory authority, Erhan Cetinkaya, in the midst of the debate about the rapid increase in the inflation rate on Saturday.

Erdogan gave no reason for the dismissal of Dincer. However, this was criticized at the beginning of January after publication of the inflation rate for December. According to media reports, Erdogan accused Dincer of exaggerating the extent of the economic crisis in Turkey. The opposition, however, questioned the official figures on inflation and speculated that the actual increase in the cost of living was at least twice as high.

Inflation is the result of the weak lira – and is now a political issue

The high price increase is primarily the result of the weak lira, as it makes imports more expensive. After a dramatic fall in 2021, the Turkish government has managed to stabilize the national currency by covering losses from currency fluctuations under certain conditions.

The development of producer prices, among other things, shows the extent to which the price increase of imported goods in Turkey has an impact. Prices that producers charge for their goods rose 93.5 percent year-on-year in January. Producer prices are likely to pass through to consumer prices, at least in part, with a delay. The main reason for the sharp increase in consumer prices is the loose orientation of Turkish monetary policy. Despite the high inflation, the Turkish central bank lowered the key interest rate several times last year, most recently to 14.0 percent.

Inflation has meanwhile also become one of the most important issues in Turkish politics. President Erdogan is pursuing a strategy that contradicts conventional economics, as he strictly rejects an increase in key interest rates to curb inflation. Erdogan, on the other hand, would like to boost credit and investment through low interest rates – but this will continue to increase the amount of money in circulation.

Finance Minister: Price hikes expected to peak in April

In an interview with the Japanese business newspaper "Nikkei" published on Thursday, Turkish Finance Minister Nureddin Nebati said that he expects price increases to peak in April. In his estimation, the inflation rate should not rise above the 50 percent mark.

However, analyst Tatha Ghose from Commerzbank referred to the recent change at the head of the Turkish statistical office. There is now concern on the market that the personnel change could have consequences for the reliability of future economic data from Turkey. "This cocktail of little credible monetary policy, the central bank's trials and tribulations and the government's in-between steps is an old acquaintance and is very likely to trigger the next lira crisis sooner or later," warned Ghose.

In the FX market, the Turkish lira came under pressure following the release of inflation data. However, the price losses in trading with the US dollar and the euro were limited and amounted to less than one percent each. (dpa/afp/mgb)