Shoppers stroll the aisles of a bazaar in Konya, Turkey. The country is experiencing brutal inflation, with prices of food and non-alcoholic beverages up 70.3% year-on-year for the month of March.
Diego Copolo | Norfoto | Getty Images
Turkey’s inflation rate rose by nearly 79% last month, the highest the country has seen in a quarter of a century.
The annual inflation rate for June was 78.62%, according to the Turkish Statistical Institute, beating expectations. This is the country’s highest annual inflation reading in 24 years. The monthly increase was 4.95%.
High consumer prices have severely affected the population of 84 million, with little hope of improvement in the near term as a result of the Russo-Ukrainian war, rising energy and food prices, and a sharp depreciation of the lira, the national currency.
Transportation prices jumped 123.37% from the previous year, and food and non-alcoholic beverages prices rose 93.93%, according to government data.
Turkey has enjoyed rapid growth in previous years, but President Recep Tayyip Erdogan For the past few years, he refused to raise interest rates purposefully to calm the resulting inflation, He described interest rates as the “mother of all evil.” The result was a lower Turkish lira and much less purchasing power for the average Turkish citizen.
Erdogan has instructed the country’s central bank – from which analysts say it has no independence – to repeatedly cut borrowing rates in 2020 and 2021, even as inflation continues to rise. Central bank chiefs who expressed opposition to this course of action were dismissed; By the spring of 2021, Turkey’s central bank had seen four different governors in two years.
The country’s interest rate was gradually reduced to 14% last fall and has remained unchanged since then. The lira fell 44 percent against the dollar last year, and it fell 21 percent against the dollar since the beginning of this year.
The Turkish government has introduced unconventional policies to try to support the lira without raising interest rates. In late June, the Turkish banking regulator Announce a ban on lira loans For companies holding what they consider a lot of foreign currency, which briefly boosted the currency but caused more uncertainty among investors who questioned the sustainability of the measure.
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