March 5, 2022- 11:39 p.m.
Turkish prices rose at their fastest rate in 20 years in February as the lira tumbled and food and energy prices surged, stirring discontent about the state of the economy.
The consumer price index rose 54.4 per cent year on year in February, the Turkish Statistical Institute said on Thursday, outpacing a forecast of 52.5 per cent in a poll by Bloomberg.
The data weighed on the lira, down 0.8 per cent on Thursday to about TL14 against the dollar.
Food prices climbed 64.5 per cent and transportation jumped 75.8 per cent last month, pushing the index to its highest rate since March 2002.
The cost of food and utilities is straining household budgets and has made people such as 32-year-old mother Cansu Kara anxious.
“I don’t remember the last time I entered a butcher shop,” she said. “Meat is a meal for the rich.”
President Recep Tayyip Erdogan, who calls himself an “enemy of interest rates”, triggered a collapse in the currency at the end of last year when he ordered the central bank to aggressively cut borrowing costs despite soaring inflation.
The central bank is due to hold its next rate-setting meeting on March 17.
It has kept rates unchanged so far this year after cutting them by 500 basis points late last year.
The currency has shed nearly 50 per cent in the past year, and Erdogan is betting that the weaker currency will boost exports and fuel economic growth ahead of a general election next year.
Opinion polls suggest voters are deeply unhappy with the economy, even as Erdogan’s pursuit of growth at all costs lifted gross domestic product by 9 per cent last year.
Three out of four Turks last month said the government was mismanaging the economy, according to a survey by MetroPoll.
The cost of living was the biggest problem cited by respondents in another poll published by MAK Research last week.
Erdogan on Tuesday promised his government would “bring inflation under control in the summer months”.But economists said taming inflation without an interest rate increase was likely to prove elusive, especially as the war in Ukraine spurs higher global energy prices.
Turkey imports most of its oil, natural gas and coal, primarily from Russia.
“The spillover effects from the Russia-Ukraine crisis, including higher global commodity prices and potentially fresh supply chain disruptions, mean that the risks are skewed to the upside,” Jason Tuvey, senior emerging markets economist at Capital Economics, wrote in a research note.
“Inflation will stay close to these high levels until the very final months of this year, but the central bank and, crucially, President Erdogan seem to have no appetite for interest rate hikes,” he said.
The government’s inflation data showed producer prices last month more than doubled, and those costs will probably be passed on to consumers in the coming months.
“Once prices rise, they rarely come down,” said Kara. “All I can do is turn off the lights, there’s no other way to stretch my budget.”
