Annual inflation in Turkey surged to a fresh 24-year high of 80.21% in August 22 that is slightly under expectations as per data declared on Monday, following the central bank unexpectedly reduced interest rates as well as stoked around year-long cost-of-living crisis.
Since the central bank steadily lowered its policy rate by 500 basis points to 14% last autumn, in an unconventional easing cycle pushed by President Tayyip Erdogan that sparked a lira crisis, inflation has exploded higher. The bank dropped rates by another 100 basis points to 13% last month despite forecasts for continued high inflation, blaming a sluggish economy.
Consumer prices increased by 1.46% month over month, according to the Turkish Statistical Institute (TUIK), less than the 2.0% predicted in a Reuters poll. The predicted annual rate of inflation was 81.22%.
The score for last month was the highest since 81.4% in August 1998, when Turkey was attempting to put a stop to a decade-long period of uncontrollably high inflation.
In August, the domestic producer price index increased by 2.41% month over month for an increase of 143.75% annually.
“Interest rate reductions by the central bank have resumed. The biggest concerns for Turkey are this and the persistently high PPI inflation rate, both of which are slowly but definitely undermining the lira’s fundamentals “Tatha Ghose of Commerzbank stated.
The industry with the biggest annual inflation was transportation, where costs increased 116.87% year over year despite falling 1.78% month over month. Prices increased by 90.25 percent in the important food and non-alcoholic beverage industry.
The reduction last month coincided with global central banks’ rate increases. With its economic strategy emphasizing low rates to increase output and exports while also generating a current account surplus, Ankara claims that inflation will decline.
The domestic producer price index rose by 2.41% month over month in August, adding up to a 143.75% annual gain.
“The central bank has resumed cutting interest rates. The chronically high PPI inflation rate and this are Turkey’s main worries, since both are gradually but unavoidably weakening the lira’s fundamentals “Commerzbank’s Tatha Ghose noted.
Transportation has the highest annual inflation, with expenditures rising 116.87% year over year but decreasing 1.78% month over month. In the significant food and non-alcoholic beverage sector, prices rose by 90.25 percent.