Turkey’s annual inflation rate rises to nearly 79%, reaching its highest level in 24 years

Shoppers stroll the aisles of a bazaar in Konya, Turkey. The country is experiencing brutal inflation, with the prices of food and non-alcoholic drinks rising 70.3% year-on-year in March.

Diego Cupolo | Nurfoto | Getty Images

Inflation in Turkey rose nearly 79% last month, the highest the country has seen in a quarter of a century.

According to the Turkish Statistical Institute, annual inflation was 78.62% in June, exceeding forecasts. That is the country’s highest annual inflation in 24 years. The monthly increase was 4.95%.

Rising consumer prices have hit the population of 84 million hard, with little hope of improvement in the short term due to the war between Russia and Ukraine, high energy and food prices and a deeply depreciated lira, the national currency.

Transport prices rose 123.37% from the previous year, and food and non-alcoholic drinks prices rose 93.93%, according to government data.

Turkey has experienced rapid growth in recent years, but President Recep Tayyip Erdogan has in recent years refused to raise interest rates in any meaningful way to cool the resulting inflation, calling interest rates the “mother of all evil.” The result is a sharply declining Turkish lira and much less purchasing power for the average Turk.

Erdogan ordered the country’s central bank – which analysts say is not independent of him – to cut borrowing rates repeatedly in 2020 and 2021, even as inflation continued to climb. Central bank chiefs who opposed this course of action were fired; by spring 2021, Turkey’s central bank had seen four different governors in two years.

The country’s interest rate was gradually cut to 14% last fall and has remained unchanged since then. The lira fell 44% against the dollar last year and has fallen 21% against the dollar since the beginning of this year.

The Turkish government has adopted an unorthodox policy of trying to prop up the lira without raising interest rates. In late June, Turkey’s banking regulator announced a ban on lira lending to companies it believes are holding too much foreign currency, giving the currency a brief boost but adding uncertainty to investors who had doubts about the sustainability of the currency. the measure.

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