Turkey’s annual consumer price inflation (CPI) reached 78.62% in June up from 73.5% in May according to official statistics agency figures (Turkstat); falling short of the Bloomberg survey of 79.95%.
Monthly CPI inflation was 4.95%, compared with the median estimate of 5.73% in a separate survey. Annual price gains in food accelerated to 93.93% in June based on 2.09% mom hike from 91.6% in May.
Similarly, Turkey’s producer prices continued to rise reaching an annual 138.31% compared to 132.16% in May 2022.
Core inflation B index, which strips out unprocessed food, energy, alcoholic beverages, tobacco and gold rose to 64.42% from 61.63% in May 2022. Core-B Index was at 18.16% back in June 2021 and at 11.95% in June 2020.
Turkey’s soaring CPI and PPI inflations stem partly from the global spike in energy and other commodity costs which are augmented by the AKP’s deep negative real interest rate policy that leaves TL unprotected. The central bank keeps its policy rate at 14% for the past six meetings, maintaining an ultra-loose monetary policy in place since late last year as TL keeps losing value and the inflation hence spirals up. The lira is the worst performer among its emerging markets peers again this year, losing more than 20% against the dollar ytd.
Looking forward, the next central bank meeting is scheduled for July 21 and no change of monetray policy is in the cards as Erdoğan reiterates they would continue to lower the policy rate and that inflation will get tamer by the spring of 2023.
On the contrary with 138% PPI and 78% CPI as of June 2022, Turkey’s CPI inflation is heading to three digits based on ultra loose monetray policy which will soon be accompanied by ultra loose fiscal policy on the countdown to elections.