Turkish Inflation Hits New Heights: What’s Next?
In September 2023, Turkey witnessed a significant surge in its annual consumer price inflation, which reached 61.53%.
Meanwhile, the month-on-month inflation rate stood at 4.75%. This contrasted with the August figures, where inflation was reported at 58.9%. In a parallel trend, the domestic producer price index experienced a 3.40% increase on a month-to-month basis in September. Initially, a Reuters poll had projected inflation to touch 61.7%.
A recent report by Bloomberg highlights that Turkish inflation has accelerated at its fastest pace this year, primarily driven by soaring energy costs and substantial interest rate hikes.
Offering insight into this development, Bartosz Sawicki, an analyst at the Conotoxia Investment Group, commented, “Inflation in Turkey is a result of a complex combination of factors, including deeply negative real interest rates, significant wage hikes, tax system reforms, and a continuously weakening lira.”
Notably, Turkey faced a severe inflation crisis last year when the inflation rate reached a staggering 85%, following a historic currency crash towards the end of 2021.
This crash was largely attributed to an aggressive cycle of interest rate cuts. However, after assuming office in May, President Tayyip Erdogan implemented an assertive economic strategy marked by stringent monetary policies.
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Both analysts and the government foresee Turkish inflation reaching approximately 70% by the conclusion of 2023. Furthermore, it is anticipated to approach 75% around May 2024 before displaying any signs of moderation. Consequently, the possibility of interest rate cuts appears remote.
The central bank raised the key interest rate by 500 basis points in the preceding month, bringing it to 30%. This marked the fourth consecutive month of monetary tightening in the country.
President Erdogan’s policies yield positive results, as monthly price increases have decelerated, dropping from 9.1% in August and 9.5% in July to 4.8% in September.
According to William Jackson, an analyst at Capital Economics, “The slight uptick in inflation to 61.5% last month, compared to 58.9% in August, suggests that the inflation surge may be nearing stabilization.”
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
