Turkey’s annual inflation jumps to nearly 79%, hitting 24-year high

Shoppers walk the aisles of a bazaar in Konya, Turkey. The country is experiencing brutal inflation, with food and soft drink prices rising by 70.3% year-on-year in March.

Diego Cupolo | Nurphoto | Getty Images

Inflation in Turkey soared to nearly 79% last month, the country’s highest in a quarter of a century.

Annual inflation was 78.62 percent for June, according to the Turkish Statistical Institute, beating forecasts. This is the highest annual inflation in the country in 24 years. The monthly increase is 4.95%.

Rising consumer prices have hit the population of 84 million hard, with little hope of improvement in the near future as a result of the Russian-Ukrainian war, high energy and food prices and a sharply depreciated lira, the national currency.

Transportation prices jumped 123.37 percent from a year earlier, and food and soft drink prices rose 93.93 percent, according to government data.

Turkey has enjoyed rapid growth in previous years, but President Recep Tayyip Erdogan has in the past few years refused to significantly raise interest rates to cool the resulting inflation, describing interest rates as the “mother of all evils”. The result is a falling Turkish lira and much less purchasing power for the average Turk.

Erdogan has instructed the country’s central bank – which analysts say is not independent of him – to repeatedly cut borrowing rates in 2020 and 2021, even as inflation continues to rise. Central bank chiefs who opposed this course of action were fired; by spring 2021, Turkey’s central bank had four different governors in two years.

The interest rate in the country was gradually reduced to 14% last autumn and has remained unchanged since then. The lira fell 44% against the dollar last year and is down 21% against the greenback since the start of this year.

Turkey’s government has introduced unorthodox policies to try to support the lira without raising interest rates. In late June, Turkey’s banking regulator announced a ban on lira loans to companies holding too much foreign currency, which briefly boosted the currency but sparked more uncertainty among investors who questioned the sustainability of the measure.