Turkey inflation rises to 59% as the Turkish lira devalues

TL;DR Breakdown

  • Turkey’s inflation reached 58.9% YoY in August, the highest since December 2022, largely driven by the devaluation of the Turkish lira.
  • Turkey’s Finance Minister, Mehmet Simsek, acknowledged the need for a transitional phase to combat the high inflation.

Description

In August, inflation in Turkey surged to 58.9% year-on-year, marking the highest rate since December 2022, as per official data released on Monday. Prices have soared nearly 60% compared to the same period last year, and there was a 9.1% increase compared to the previous month. This rapid rise in prices can be attributed to … Read more

In August, inflation in Turkey surged to 58.9% year-on-year, marking the highest rate since December 2022, as per official data released on Monday. Prices have soared nearly 60% compared to the same period last year, and there was a 9.1% increase compared to the previous month. This rapid rise in prices can be attributed to the devaluation of the Turkish lira.

Turkey is going through an economic transition period

After experiencing a downward trend for eight consecutive months, inflation began to pace again in July, reaching 47.8% year-on-year. The lowest point in the past year and a half was in June, which stood at 38.2% year-on-year. In contrast, the highest inflation rate recorded was 85.5% in October 2022. While alarmingly high, the official figures might not paint the full picture of the problem as independent economists from the Inflation Research Group estimate that the year-on-year increase in consumer prices might be 128%.

After the data’s release, Turkey’s Finance and Treasury Minister Mehmet Simsek acknowledged that his country is going through an economic transition period. Notably, Simsek was appointed to lead the country’s economy as part of a shift towards a more conventional economic policy following Turkish President Recep Tayyip Erdogan’s reelection in May, as Turkey faces one of its most severe economic crises.

Simsek expressed on X that combating inflation will be a lengthy process, and they are currently in a transitional phase. He added that they will take all necessary measures, including monetary tightening, credit policy adjustments, and income policies, to gain control over inflation and bring it down. 

Meanwhile, transportation costs were the primary driver of the monthly increase in consumer prices, surging by 16.61%, partly due to consecutive fuel price hikes. Household equipment and food prices were the second and third contributors to the spike in monthly prices in August, rising by more than 9% and 8%, respectively.

Turkish lira devalues 

Turkey’s year-on-year inflation began rising again in July after eight months of decline. Annual inflation in the country reached a 24-year high of 85.5% in October, mainly due to a rapid devaluation of the Turkish lira. That was attributed to President Erdogan’s unconventional economic policies, which included maintaining low interest rates despite rising inflation.

In response to the economic challenges and to address the crisis, the Turkish Central Bank, under new Governor Gaye Erkan, who is a mainstream economist and former US banking executive, embarked on a policy U-turn after the elections. The bank raised interest rates to 25% in consecutive hikes, reversing the previous policy of keeping rates low, which was at odds with the strategies employed by Turkey’s G-20 and regional peers to manage inflation and stabilize their currencies during the global challenges posed by events such as Russia’s invasion of Ukraine and the COVID-19 pandemic.

A poll conducted last month indicated expectations of 2.9% full-year growth in Turkey, which is lower than the trend seen in emerging market economies striving to reverse a years-long trend of foreign investor outflows.

With President Erdogan’s ruling AK Party aiming to regain control of major cities like Istanbul and Ankara from the opposition in the March elections, some analysts believe that higher inflation, rising unemployment, and slower growth could test the President’s tolerance for the recent economic policy changes. So far, Erdogan has dismissed four central bank governors in just four years. His push to cut interest rates despite increasing prices led to a significant currency crash in late 2021 and pushed inflation above 85% last year.

Commerzbank analyst Tatha Ghose expressed concern, stating that the risk is ever-present that Erdogan could lose patience. Ghose added that inflation will remain very high for an extended period, which could trigger second-round effects like wage settlements. The sentiment is echoed by the Central Bank of the Republic of Türkiye, which has stated that inflation is likely to rise to nearly 62% by the end of the year, which is the upper limit of its previous forecast, despite an aggressive 750-point rate hike in August.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions. 

文章来源于互联网:Turkey inflation rises to 59% as the Turkish lira devalues

Disclaimers:

1. You are solely responsible for your investment decisions and this info is not liable for any losses you may incur.

2. The copyright of this article belongs to the writer, it represents the writer's opinions only, not represents the site's ones. Not financial advice.

Previous 2023年9月6日 22:51
Next 2023年9月7日 00:08

Related articles

  • The dangerous consequences of China’s absence at G20

    TL;DR Breakdown China’s President Xi Jinping chooses not to attend the upcoming G20 summit in India. The move can be seen as a strategic sidestep or a snub, causing ripples in global diplomacy. Historically, the country has never missed a G20 summit, making this absence significant. Description China’s unexpected decision to sidestep the upcoming G20 summit in India sets off alarms for geopolitical pundits. Is this merely a snub or a deeper indicator of Beijing’s waning interest in global economic cooperation? Rising Tensions and Uncertainty in the Global Arena When Western officials learned that President Xi Jinping wouldn’t grace the G20 summit … Read more China’s unexpected decision to sidestep the upcoming G20 summit in India sets off alarms for geopolitical pundits. Is this merely a snub or a deeper indicator of Beijing’s waning interest in global economic cooperation? Rising Tensions and Uncertainty in the Global Arena When Western officials learned that President Xi Jinping wouldn’t grace the G20 summit with his presence, it felt like the culmination of a year’s worth of resistance from China. Instead, they’ll be dealing…

    Article 2023年9月2日
  • Sam Bankman-Fried to reappear in court for revised plea

    TL;DR Breakdown Sam Bankman-Fried, FTX cryptocurrency exchange founder, faces court for fraud-related charges. Denied vegan diet and necessary medication in prison, affecting his trial preparations. Charges stem from the 2022 FTX collapse and alleged theft of customer funds. Description Sam Bankman-Fried, the once-venerable founder of FTX cryptocurrency exchange, has found himself in hot water again. As the weight of his impending fraud trial hangs heavy, he’s been battling more than just legal challenges, ranging from surviving on a meager diet in prison to grappling with a new indictment. From Billionaire to Prison Inmate: Bankman-Fried’s … Read more Sam Bankman-Fried, the once-venerable founder of FTX cryptocurrency exchange, has found himself in hot water again. As the weight of his impending fraud trial hangs heavy, he’s been battling more than just legal challenges, ranging from surviving on a meager diet in prison to grappling with a new indictment. From Billionaire to Prison Inmate: Bankman-Fried’s Shocking Descent Bankman-Fried, at just 31 years of age, saw his empire crumble when he entered a not guilty plea at the Manhattan federal court. Facing a staggering…

    Article 2023年8月23日
  • Ripple’s legal team and SEC engage in war of words over lawsuit tactics

    TL;DR Breakdown Ripple’s Chief Legal Officer, Stuart Alderoty, criticized the SEC’s latest court filing as a “hypocritical pivot,” accusing the regulatory body of inconsistencies in its stance on cryptocurrency regulations. The SEC’s recent filing accuses Ripple Labs of intentionally prolonging the lawsuit to maintain public sales of XRP, a claim that has sparked outrage and allegations of hypocrisy from the Ripple community. Prominent defense lawyer James Filan and other legal experts have questioned the SEC’s sincerity in wanting to conserve judicial resources, pointing out that the SEC itself has been known for employing delay tactics in the case. Description Stuart Alderoty, Ripple’s Chief Legal Officer, has labeled the U.S. Securities and Exchange Commission’s (SEC) latest court filing as a “hypocritical pivot,” escalating tensions in the ongoing legal battle between the two entities. Alderoty took to social media to criticize the SEC’s recent submission, which aimed to reinforce its interlocutory appeal.  He pointed out what … Read more Stuart Alderoty, Ripple’s Chief Legal Officer, has labeled the U.S. Securities and Exchange Commission’s (SEC) latest court filing as a “hypocritical pivot,” escalating…

    Article 2023年9月10日
  • China’s president is focusing on all the wrong things

    Description Amidst the rumbling waves of China’s economic challenges, President Xi Jinping is seemingly turning a blind eye to pressing issues. While the world watches in suspense, China’s leader appears to be engrossed elsewhere, letting serious economic matters slide. Economic Woes Fall on Deaf Ears From property sector unrest to rising local debt and floundering consumer … Read more Amidst the rumbling waves of China’s economic challenges, President Xi Jinping is seemingly turning a blind eye to pressing issues. While the world watches in suspense, China’s leader appears to be engrossed elsewhere, letting serious economic matters slide. Economic Woes Fall on Deaf Ears From property sector unrest to rising local debt and floundering consumer spending, there’s an evident cacophony of economic problems. Many have anticipated and even suggested a flood of capital to stabilize spending, halt deflation, and fortify a feeble currency. However, Jinping’s ears seem tuned to a different frequency, mainly focused on internal and global security matters. Despite the cacophony, he remains stoic against large-scale fiscal stimuli, fearing added governmental debt and potential financial system instability. China’s meticulous…

    Article 2023年9月5日
  • Fed warns top U.S. banks of incoming $500b meltdown

    TL;DR Breakdown U.S. banks could survive a hypothetical $541bn loss, according to Federal Reserve’s annual stress tests. The tests gauge banks’ ability to meet capital requirements under extreme economic scenarios. Banks exceeding requirements can allocate capital to dividends and buybacks freely. Description The financial colossi of the United States could weather a $541 billion loss in a hypothetical economic apocalypse. This is the outcome of the annual stress tests carried out by the Federal Reserve, putting stalwarts like JPMorgan Chase and Goldman Sachs in a favorable light, allaying Wall Street fears regarding the systemic importance of banks … Read more The financial colossi of the United States could weather a $541 billion loss in a hypothetical economic apocalypse. This is the outcome of the annual stress tests carried out by the Federal Reserve, putting stalwarts like JPMorgan Chase and Goldman Sachs in a favorable light, allaying Wall Street fears regarding the systemic importance of banks amidst heavy losses. The silver lining amidst a financial catastrophe According to the Fed’s stress tests, U.S. banks emerged victorious with their capital reserves surpassing…

    Article 2023年7月2日
TOP