Turkey’s annual inflation rate jumped to a 24-year high of 78.62% in June, data showed on Monday, just above forecast, driven by the impact of the Ukraine war, soaring commodity prices and a slide in the lira since a December crisis.
Inflation has surged since last autumn, when the lira slumped after the central bank gradually cut its policy rate by 500 basis points to 14%, in an easing cycle sought by President Tayyip Erdogan to boost economic growth.
The latest figures showed consumer prices rose 4.95% in June, compared to a Reuters poll forecast of 5.38%. Annually, consumer price inflation was forecast to be 78.35%.
June consumer price inflation was driven by transportation prices, which surged 123.37%, and food and non-alcoholic drinks prices, which jumped 93.93%, data from the Turkish Statistical Institute (TUIK) showed.
It was the highest annual inflation reading since September 1998, when annual inflation hit 80.4% and Turkey was battling to end a decade of chronically high inflation. The lira was unchanged at 16.78% after the data.
Inflation has been further stoked this year by the economic fallout from Russia’s invasion of Ukraine.
Erdogan said last week he expects inflation to come down to “appropriate” levels by February-March next year. The central bank, which kept the benchmark interest rate steady at 14% despite the rise, said inflation would drop to 42.8% by end-2022.
Witold Bahrke, a senior macro strategist at Nordea Asset Management based in Denmark, said Turkey was “in a league of its own” among emerging markets (EM) when it came to inflation due to what he said was its lack of credible policy response.
“Inflation is a general issue for EM and in Turkey you end up with a toxic mix as we also have a policy issue,” Bahrke said, adding that he expected some further weakening of the lira.
Opposition lawmakers and economists have questioned the reliability of the TUIK data, claims that TUIK has dismissed. Polls show Turks believe inflation is far higher than the official data suggests.
Last week’s inflation poll also showed inflation was seen declining to just below 70% by end-2022.
The lira currency shed 44% against the dollar last year and is down 21% this year.
The domestic producer price index climbed 6.77% month-on-month in June for an annual rise of 138.31%.
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