Shoppers stroll down the aisles of a bazaar in Konya, Turkey. The country is experiencing brutal inflation, with food and non-alcoholic beverage prices rising 70.3% year-on-year in March.
Diego Cupolo | Nurfoto | Getty Images
Inflation in Turkey rose by about 79% last month, the highest the country has seen in a quarter of a century.
The annual inflation rate was 78.62% in June, according to the Turkish Institute of Statistics, beating forecasts. The monthly increase was 4.95%.
Rising consumer prices have hit the 84-million-strong population hard, with little hope of improvement in the short term as a result of the war between Russia and Ukraine, high energy and food prices, and a strong depreciation of the lira, the national currency.
Transportation prices rose 123.37% year-over-year, and food and non-alcoholic beverage prices rose 93.93%, according to government data.
Turkey has seen rapid growth in previous years, but President Recep Tayyip Erdogan has refused in recent years to significantly raise rates to cool the resulting inflation, describing interest rates as the “mother of all evil.” . The result has been a plummeting Turkish lira and much less purchasing power for the average Turk.
Erdogan instructed the country’s central bank, which analysts say has no independence from it, to repeatedly reduce debt rates in 2020 and 2021, although inflation continued to rise. The heads of the central banks who expressed their opposition to this line of action were fired; by the spring of 2021, Turkey’s central bank had seen four different governors in two years.
The country’s interest rate gradually fell to 14% last fall and has remained unchanged since then. The lira fell 44% against the dollar last year, and has fallen 21% against the dollar since the beginning of the year.
The Turkish government has introduced unorthodox policies to try to strengthen the lira without raising interest rates. In late June, Turkey’s banking regulator announced a ban on lira loans to companies that had what they considered too much foreign currency, which increased the currency briefly but caused more uncertainty among investors who questioned sustainability. of the measure.