Runaway inflation in Turkey has continued to pick up speed. In October, consumer prices were 85.51 percent higher than a year earlier, according to the National Bureau of Statistics in Ankara. In the previous month, inflation was 83.4 percent. For comparison, Germany saw consumer prices rise by 10.4 percent in October.
On a monthly basis, consumer prices in Turkey rose by 3.5 percent in October. Consumer prices in the country have been rising sharply for about a year. At the end of 2021, inflation was only around 20 percent. The inflation rate in Turkey was last this high in 1997; at that time it was 85.67 percent.
Independent experts question the official numbers; according to the inflation research group, the inflation rate is as high as 185 percent year-on-year. Since January, the value has been 115 percent.
Producer prices, which rose by 157.7 percent year-on-year in October, show how strong the price pressure is at the moment. Producer prices capture producer-level prices by reflecting producer selling prices. The annual rate of producer prices is more than double what it was a year ago. Producer prices affect the consumer’s cost of living indirectly and with a time lag.
In Turkey, the rise in consumer prices began at the turn of the millennium. The high inflation there is driven by several factors. The weak national currency, the lira, has been driving up prices for a long time since it makes goods imported into Turkey more expensive. In addition, there are ongoing problems in the international supply chains, which make preliminary products more expensive. In addition, the prices of energy and raw materials are rising, mainly because of the Russian war against Ukraine.
In recent months, the development has been reinforced by the central bank’s unorthodox monetary policy. After a nearly eight-month pause, it lowered the key interest rate in August, September and October, it now stands at 10.5 percent. In contrast to many other central banks, the Turkish central bank is not fighting the galloping inflation by raising interest rates.
Turkish President Recep Tayyip Erdogan rejects the conventional wisdom that central banks should raise interest rates when inflation is high. The central bank is actually independent, but since 2019 Erdogan has fired three heads of the institute. He recently announced that interest rates would continue to fall “as long as I am in power”.
A few months before the presidential election, Erdogan is fully committed to economic growth. Inflation is forcing citizens and companies to consume more because otherwise their money will lose a lot of value.
