Turkey’s annual inflation flares up beyond 80%

Turkey’s annual inflation climbed to a fresh 24-year high of 80.21 percent in August, a bit below expectations according to official data, after the central bank unexpectedly cut interest rates and stoked a cost-of-living crisis.

Inflation has raced higher since last autumn, when the lira slumped after the central bank gradually cut its policy rate by 500 basis points to 14 percent in an unorthodox easing cycle sought by President Tayyip Erdogan.

On the monthly level, the Consumer Price Index (MoM) fell to 1.46 percent, against expectations of a 2 percent increase, while this came against an actual achievement last month of 2.37 percent. On the other hand, the Turkish producer price index in August increased by 2.41 percent, compared to an increase of 5.17 percent in the month before last, while the producer price annual index in August increased by 143.75 percent compared to 144.61 percent.
The data had little impact on the lira , which traded at 18.2250, unchanged from its early levels.
The economic fallout from Russia’s invasion of Ukraine has also stoked inflation this year, as well as the lira’s continued decline. The currency shed 44 percent against the dollar last year, and is down more than 27 percent this year.

The government has said inflation will fall with its economic programme prioritising low rates to boost production and exports with the aim of achieving a current account surplus.

According to government forecasts released on Sunday, Turkey expects inflation to ease to 65 percent by end-year.