Turkey inflation surges to near 20-year high

A merchant counts Turkish lira banknotes at the Grand Bazaar in Istanbul (file). Turkey’s consumer prices surged by a stronger-than-expected 48.7% from the same period in January last year, up from an annual rate of 36.1% in December, according to the Turkish statistics agency.

Turkey’s annual inflation rate in January reached its highest level since April 2002, official data showed Thursday, after a currency crisis decimated people’s purchasing power.Consumer prices surged by a stronger-than-expected 48.7% from the same period in January last year, up from an annual rate of 36.1% in December, according to the Turkish statistics agency.The reading came out just days after President Recep Tayyip Erdogan changed the head of the state statistics agency for the fourth time since 2019.Independent data collected by Turkish economists suggested that the annual rate of inflation rose to more than 110% in January.Erdogan staunchly opposes raising interest rates, which he believes cause inflation — the exact opposition of conventional economic thinking.He said on Monday that Turks would “have to carry the burden” of inflation for “some time”.“God willing we have entered a period where each month is better than the previous one,” he added.Turkey has suffered from persistently high inflation for years, experiencing two currency crises since 2018.The second last year came after sharp interest rate cuts that put them far below the rate at which prices were rising, eroding Turks’ purchasing power and the value of their savings.This prompted Turks to stock up on gold and foreign currency, resulting in a currency crash that saw the lira lose 44% of its value against the dollar in 2021.Turkish Finance Minister Nureddin Nebati told Nikkei Asia in an interview published on Thursday that inflation would peak in April before falling to the single digits by the June 2023 general election.The central bank last month also revised up its forecast for inflation at the end of 2022 to 23.2% from 11.8%, although most economists dismiss the reading as overly optimistic.“We expect inflation to hover at 45%-50% throughout much of this year and, barring another collapse in the lira, it will only drop back in the final months of 2022,” said analyst Jason Tuvey of Capital Economics.The government hopes that inflation will fall after pressures — including a minimum wage hike in January and rising energy bills for households and businesses — subside and new currency support measures kick in.The central bank paused a four-month streak of interest rate cuts in January, providing relief for lira, which has held largely steady this year.