Inflation in Turkey jumped to 36.08% in December on an annual basis, the highest level since September 2022, due to the dip in the pound, according to data released today.
On a monthly basis, consumer prices rose 13.58%, according to the Turkish Statistics Service, compared to a Reuters survey forecast of a monthly increase of 9% and an annual increase of 30.6%.
The Turkish currency traded at 13.6 pounds against the dollar, falling 3%, but recovered from the low of 13.92 dollars it had reached earlier. In 2021, the pound lost 44% of its value after falling sharply in November and December.
The producer price index rose 19.08% on a monthly basis in December and 79.89% on an annual basis, reflecting the explosion in import prices due to the dip in the pound.
The rise in consumer prices is the largest since it reached 37% in September 2002, shortly before President Recep Tayyip Erdogan’s AK Party came to power in November of that year. The forecasts of 13 economists ranged from 26.4% to 37.3%.
At the peak of the price increases were the prices related to transport, which jumped by 53.66% on an annual basis, while the prices of food and beverages jumped by 43.8%.
“This reflects a vicious cycle of demand-driven inflation, which is very dangerous because the central bank had implied that the inflationary pressures came from supply constraints and that it could not do anything about it,” a Spinn executive said. Consulting in Istanbul, adding: “Interest rates must be raised immediately and aggressively. “Annual inflation will probably reach 40-50% in March.”
Inflation has been hovering around 20% in recent months, driven by the pound falling to a record low after the central bank cut its key interest rate by five percentage points since September under pressure from Erdogan.
The pound fell to a record low of 18 18.4 per dollar in December and then recovered after government intervention in the market and Erdogan’s announcement of a pound-protection scheme against fluctuations.
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