In Turkey, inflation reached new 20-year highs in March at 61.14% yoy, up 5.46 points in a month, according to official statistics just released. In February, the rise in consumer prices had reached 54.4% on an annual basis, accumulating records linked to the collapse of the Turkish lira and the surge in energy prices in particular. Producer prices have been rising in three figures for two months.
The prices of the transport sector have increased the most, which have marked an increase of 99.12% in one year. Followed by food and soft drinks (70.33%), home furnishings (69.26%), hotels, bars and restaurants (60.4%) and services (60.2%). Inflation data confirms an upward trend in prices that began in the fall of 2021 at the same time as the collapse of the national currency which last year lost 44% of its value against the dollar.
The Turkish lira weakened in parallel with the Central Bank’s decision to cut its benchmark interest rate (today at 14%, -500 basis points from September to December) in line with President Recep Tayyip Erdogan’s economic vision. The Turkish currency is trading at 14.7 against the dollar while a year ago it was around 8. In the last 3 months, the Central Bank has not touched the interest rates which in real terms are currently the lowest in the world. (-47%).
Governor Sahap Kavcioglu said support for the local currency would be a key focus this year, but has so far not acted accordingly with tighter monetary policy. The central bank hopes to curb price growth by taking measures to encourage de-dollarization, that is, financial incentives to convert savings from hard currencies to the lira. The next Central Bank rate meeting is scheduled for April 14th.
