Inflation in Turkey increased again in April. Compared to the same month last year, consumer prices rose by 69.8 percent, the statistics office in Ankara said. This corresponds to the highest inflation rate since the end of 2022. Economists had previously expected a rate of 70.1 percent.
Compared to March, inflation rose by 3.2 percent. Prices rose sharply, particularly in the areas of education, gastronomy, health and transport, as well as for alcoholic beverages and tobacco.
Lira exchange rate at record low
The Turkish central bank is combating inflation with high key interest rates. However, last week it left it at 50 percent, meaning the key interest rate remains well below the inflation rate. The so-called real key interest rate is therefore negative, which stimulates economic activity rather than slowing it down – which could also mean a further worsening of inflation.
The negative real interest rate is also seen as a reason for the weakness of the local currency, the lira. This makes financial investments in Turkey less attractive for foreign investors and makes imported goods and services more expensive. The lira’s exchange rate against both the US dollar and the euro is currently at a record low.
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In March, the central bank raised the key interest rate from 45 to 50 percent. The bank initially decided not to increase it again due to the delayed effect of monetary policy tightening. Economists assume that inflation could peak at 73 to 75 percent in May. At the end of the year it is expected to be only about half as high at 36 percent.
The central bank announced that it would keep an eye on inflation risks. The tight monetary policy stance will be maintained until a “significant and sustained decline” in the current inflation trend is observed.
The rising cost of living is considered one of the reasons for the poor performance of President Recep Tayyip Erdoğan’s AKP in the local elections a few weeks ago. In many major cities, the opposition performed significantly better than the governing party, including in the major city of Istanbul.
Inflation in Turkey increased again in April. Compared to the same month last year, consumer prices rose by 69.8 percent, the statistics office in Ankara said. This corresponds to the highest inflation rate since the end of 2022. Economists had previously expected a rate of 70.1 percent.
Compared to March, inflation rose by 3.2 percent. Prices rose sharply, particularly in the areas of education, gastronomy, health and transport, as well as for alcoholic beverages and tobacco.
The Turkish central bank is combating inflation with high key interest rates. However, last week it left it at 50 percent, meaning the key interest rate remains well below the inflation rate. The so-called real key interest rate is therefore negative, which stimulates economic activity rather than slowing it down – which could also mean a further worsening of inflation.