Turkey’s consumer price inflation rate jumped to an annual 48.7 percent in January from 36.1 percent in December, to the highest level since April 2002. The monthly spike was 11.1 percent.
The surge in annual producers’ prices was more drastic as it reached 93.53 percent from 79.9 percent in December through the 10.45 percent monthly rise.
Prices in Turkey are surging after the central bank, acting on the orders of President Recep Tayyip Erdoğan, cut interest rates between September and December to spur economic growth, and global energy prices spiked. The rate cuts sparked an exodus of capital from the lira, which lost 44 percent of its value against the dollar last year.
The CPI inflation is set to surge further to 55-60 percent range by the end of 1Q22 and hover at 45-50 percent throughout much of this year, assuming no other collapse in the lira. yet the expected further rate cuts starting from 2Q22 and the Fed’s monetary tightening are likely to exert pressures on TL.
Despite Turkey’s galloping inflation, as per the “new economic model” of low interest rates and a weak lira, Minister Nebati says no rate hikes are in the cards.
Transport prices rose by 68.9 percent and the price of food and non-alcoholic drinks by 55.6 percent, the institute said.
The lira was trading down 0.9 percent at 13.59 per dollar as of 11:22 a.m. local time in Istanbul.
To help stem the lira’s losses, the central bank has intervened heavily in the currency markets and Erdoğan announced a scheme in late December linking some Turkish lira bank deposits to the dollar. The lira has dropped by 2 percent against the dollar so far this year.