November 30, 2022

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Turkey's inflation exceeds 85% as Erdogan continues to rule out a rate hike

Turkey’s inflation exceeds 85% as Erdogan continues to rule out a rate hike

The number of Russian tourists to Europe decreased significantly during the summer, but increased in several other destinations, including Turkey (here).

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Turkey’s inflation rate rose for the 17th consecutive month in October, reaching 85.5% year-on-year as food and energy prices continued to rise, according to official figures.

The Turkish Statistical Institute reported on Thursday that food prices increased by 99% over the same period last year, housing prices increased by 85%, and transportation increased by 117%.

The domestic producer price index showed an increase of 157.69% annually and rose 7.83% on a monthly basis. The monthly increase in consumer prices was 3.54%.

The massive rise in the cost of living for the country of 85 million people has continued unabated for nearly two years, along with a significant devaluation of the Turkish currency, pound.

Controversial Turkish President Recep Tayyip Erdogan Refuse to raise interest ratesinsisting that it would hurt the economy. Economists and critics say his policies continued to hurt the lira and drive up inflation, triggering a currency crisis.

On October 20, the Central Bank of Turkey cut the key interest rate by 150 basis points The third month in a row of discountsfrom 12% to 10.5% – despite Turkish inflation, which exceeded 83% at the time.

Erdogan says the cuts are pro-growth and will continue. The president remains determined to bring the country’s interest rate down to single digits by the end of this year.

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“My biggest fight is against interest,” the president said during an event in late September. “My biggest enemy is interest. We’ve lowered the interest rate to 12%.” “Is that enough? Not enough. This needs to be further reduced.”

Liam Beach, chief emerging markets economist at London-based Capital Economics, wrote in an analyst note after the data was released that Turkey’s central bank “will remain under pressure from President Erdogan for a more flexible policy.”

He added that “although the CBRT [Central Bank of the Republic of Turkey] It said it will cut rates by 150 basis points at its meeting later this month, and there is a risk of further easing after that, adding further downward pressure on the lira.”

The pound It was trading almost flat on the day at 18.61 per dollar. It has lost more than 28% of its value against the dollar year-to-date and nearly 50% in the entire past year.