Turkey’s inflation soars 36% due to the lira crisis, the highest since 2002 Reuters

© Reuters. File photo: On January 13, 2021, women shop at a local market in the Fatih district of Istanbul, Turkey. REUTERS/Murad Sezer

ISTANBUL (Reuters)-Data released on Monday showed that Turkey’s annual inflation rate in December was much higher than expected, with a year-on-year increase of 36.08%, the highest level since September 2002, reflecting the sharp drop in the value of the lira at the end of last year.

According to the Turkish Statistics Agency, consumer prices rose by 13.58% month-on-month, compared to a Reuters survey forecast of 9%. The annual inflation forecast is 30.6%.

After the data was released, the Lira exchange rate against the US dollar was 13.6, a 3% drop that day, but it was off the early low of 13.92. After the turmoil in November and December, it fell 44% last year.

Data show that in December the producer price index rose by 19.08% month-on-month and 79.89% year-on-year, reflecting the soaring import prices caused by currency depreciation.

This is the highest annual CPI since 37.0% in September 2002, when the AK Party of President Tayyip Erdogan first came to power in November of that year. The forecast of 13 economists is between 26.4% and 37.3%.

Consumer prices, driven by transportation prices, rose 53.66% year-on-year, while prices of heavy food and beverages rose 43.8%.

“This reflects the vicious cycle of demand-driven inflation, which is very dangerous because the central bank hints that price pressure comes from supply constraints, and it can’t do anything about it,” said founding partner Ozlem Derici Sengul. Spinn Consulting Company, located in Istanbul.

“Interest rates should be raised immediately and aggressively,” she said. “By March, the annual inflation rate may reach 40-50%.”

After the Central Bank of Turkey cut the policy interest rate by 500 basis points under Erdogan’s pressure since September, the inflation rate in recent months has been around 20%.

The central bank has stated that temporary factors are pushing up prices and predicts that inflation will fluctuate in the short term.

The lira-dollar exchange rate hit a record low of 18.4 in December, and then rebounded sharply in the previous week after state-supported market intervention and Erdogan announced a plan to protect lira deposits from currency fluctuations.

For most of the past five years, inflation rates have been mostly double-digit, much higher than their emerging market peers, eroding the incomes of Turks and undermining public support for Erdogan.

In a report released at the end of October, the central bank’s year-end inflation forecast was 18.4%.

Disclaimer: Converged Media I would like to remind you that the data contained on this website may not be real-time or accurate. All CFDs (stocks, indices, futures) and foreign exchange prices are not provided by exchanges, but by market makers, so prices may be inaccurate and may be different from actual market prices, which means that prices are indicative and not Suitable for trading purposes. Therefore, Fusion Media is not responsible for any transaction losses that you may suffer as a result of using this data.

Converged Media Fusion Media or anyone related to Fusion Media will not be liable for any loss or damage caused by relying on the data, quotations, charts, and buy/sell signals contained in this website. Please fully understand the risks and costs associated with financial market transactions. This is one of the most risky forms of investment.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *