Turkish inflation lower than expected: 79.6 percent | Financial

In June inflation was 78.6 percent. Consumer prices in Turkey have risen almost continuously in double digits since the beginning of 2017. This year, the rise in prices was further exacerbated by the rising costs of energy and other raw materials, fueled in part by the Russian invasion of Ukraine.

Peak

According to the Turkish central bank, inflation is expected to peak at around 85 percent in September or October and reach just over 60 percent by the end of the year. Those prospects are still optimistic compared to market views. Economists predict inflation will peak at 91 percent in the third quarter and decline to 69 percent by the end of the year.

Turkey plunged into another economic crisis as President Recep Tayyip Erdogan embarked on an unusual economic experiment nearly a year ago. Contrary to popular theory among economists, Erdogan believes that higher interest rates lead to higher prices. Under pressure from the president, interest rates in Turkey were therefore lowered to depress the value of the Turkish lira.

Erdogan

Erdogan wants to use the cheap lira to help his country’s industry, because it will make it cheaper for other countries to buy Turkish products. However, this fall in prices also fuels inflation, because imports of fuel, for example, become more expensive. The Turkish currency has lost more than half its value against the dollar in the past 12 months and continues to be the worst performing currency of all emerging markets this year.

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