Turkey’s annual inflation rate jumped to 73.5% in May. (Image credit: Getty Images)
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[Watch China, June 4, 2022]Turkey’s annual inflation jumped to 73.5% in May, driven by the Russian-Ukrainian war, rising energy prices and a slump in the lira. 24-year high.
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On June 3, local time, data released by the Turkish National Statistical Institute (TUIK) showed that the consumer price index (CPI) in May rose by 73.5% year-on-year, higher than 70% in April, excluding food and energy and other volatile products. After the product, the core CPI rose by 56% year-on-year in May; even more amazingly, Turkey’s industrial producer price index (PPI) rose by 132%.
Inflation has soared since last fall, when Turkey’s local currency, the lira, tumbled after the central bank was capped by President Tayyip Erdogan’s 500-basis-point rate cut.
The latest figures surpassed the 73.2 percent hit in 2002, the highest level since October 1998, when annual inflation was 76.6 percent and Turkey was struggling to end a decade-long chronic high inflation. Nonetheless, the consensus forecast is for annual inflation to rise to 76.55%.
Transportation and food costs have surged by 108% and 92%, respectively, in 2021, reflecting a deepening economic crisis as Turks struggle to afford basic goods.
Opposition parties and economists have questioned the reliability of Turkey’s National Bureau of Statistics data. Opinion polls show that Turks believe inflation is much higher than official figures.
Surprisingly, Turkey’s National Statistical Office said it stopped publishing the average prices of individual items in the inflation basket, which it has compiled in its monthly table since 2003.
An index table showing changes in project groups will be released, the National Statistics Office of Turkey said.
Although global inflation levels are under increasing pressure from rising food and energy prices. However, Turkey’s ultra-loose monetary policy in an inflationary environment may be the culprit behind Turkey’s move to hyperinflation.
For much of the past five years, Turkey’s inflation rate has remained in double digits as authorities prioritize economic growth and exports. Erdogan, who has long advocated the theory that high interest rates will lead to inflation rather than curb it, has pressured Turkey’s central bank to keep borrowing costs low with the lira and prices at risk.
Moreover, the Turkish authorities do not seem to hope to improve the situation by raising interest rates at present, but prefer other possible monetary policies, trying to bring more direct economic benefits and increase the central bank’s reserves.
After cutting interest rates by 500 basis points at the end of last year, the Central Bank of Turkey has not raised interest rates. Instead, it has implemented policies aimed at expanding the use of the local currency and providing long-term investment loans. What is more noteworthy is that Turkey continues to consume its foreign exchange reserves. Its reserves will be reduced to zero.
Not only has this practice brought Turkey’s negative price-adjusted interest rates to the highest in the world, it has also made the lira one of the key reasons why emerging markets have been the worst performer against the dollar this year. As fears of soaring inflation weighed on the currency amid ultra-loose monetary policy and risk-averse global sentiment.
Responsible editor: Xin He Source: look at China
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