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Turkey’s inflation hits nearly 50%, highest in two decades

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On November 24, 2021, a group of pedestrians walked to Mahmutpasa, Istanbul’s largest textile shopping center, just outside Grand Bazaar.

Getty Images| AFP | Getty Images

The Turkish government revealed Tuesday that Turkey’s annual inflation rate has risen to 48.7%. This is despite President Recep Tayyip Erdan’s assurances for months that these figures would not continue and that his government can ease the burden on Turks who are being impacted by increasing living expenses.

The Turkish Statistical Institute reported that consumer prices rose by 11.1% in January compared the month before. That was more than analyst predictions of 9%-10%.

In 2021, the Turkish lira fell 44% in value due to Erdogan’s insistence on not raising rates while inflation continued its climb. Turkey’s currency turmoil has had a devastating impact on the country, with their salary dropping and rising costs for goods and services. The president has prioritized credit and exports, while consistently arguing — against all economic orthodoxy — that raising rates actually worsens inflation rather than taming it.  

Turkey’s central bank has cut interest rates by 500 basis points since September to 14%.

Timothy Ash (BlueBay Asset Management senior emerging markets strategist) wrote, “The results Erdogan’s failed monetary policy experiment,” in a post following the inflation report. 

It is difficult to understand how CBRT works. [Turkish central bank]Erdogan intends to focus on credit growth in order to gain popularity and boost his popularity prior to the election.

Nureddin Nebati was the Turkish finance minister. Nikkei news agency Wednesday that he predicted inflation will stay below 50%, peaking in April.

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