ISTANBUL, Jul 10 (NNN-ANADOLU) – Soaring inflation in Turkey, dashes hopes of an interest rate cut, wanted by Turkish President, Recep Tayyip Erdogan, amid an expected wave of price hikes in the coming months, experts said.
Turkey’s consumer price inflation accelerated to 17.53 percent year-on-year in Jun, the highest level in over two years, continuing to weigh on the pandemic-battered economy, according to the Turkish Statistical Institute (TSI).
On a monthly basis, prices rose by 1.94 percent in Jun, the TSI said.
The Central Bank’s year-end inflation forecast for this year stands at 12.2 percent, a target which would be very difficult to attain, observers said.
Last month, President Erdogan, who dismissed three central bank governors, in two years, over policy differences, called on monetary policymakers to cut the benchmark interest rate of 19 percent in Jul or Aug, to help lower borrowing costs for businesses.
The Turkish leader favours lower interest rates, to stimulate the economy, which expanded by seven percent in the first quarter of 2021, despite the pandemic.
But experts regard the projection of an interest rate cut not realistic, in light of inflation figures, as well as, recent electricity and natural gas price hikes.
“We believe that the Central Bank has no opportunity to cut interest rates,” Enver Erkan, chief economist at Istanbul-based Tera Securities, said.
Erkan said, inflation is expected to soar further until the end of the year. “We think that the highest inflation rate of this year has not yet come and the inflation in Jul may approach or even exceed 18 percent.”
“Risk factors concerning inflation should be closely monitored, and policy easing should not be made hastily,” he cautioned, underlining the persisting weakness of the Turkish currency, which has lost over half its value since 2018.
There is also another risk to the economy: double-digit unemployment figure is also expected to rise, as Turkey’s pandemic-era ban on layoffs and a government wage support system, adopted in early 2020, expired last week.
Prices in many sectors are expected to surge in autumn, as producers will pass on rising costs to consumers, reported Dunya, a newspaper specialising in economy.
Companies are preparing to raise the price of clothing by between 15 and 20 percent, Dunya said, citing professionals. Similar price hikes are expected for electronic goods.
Rising prices have been a serious burden for most households, who have seen their purchasing power decline steadily in recent years.
“Prices have skyrocketed. I have already spent over 100 Turkish liras (11.5 U.S. dollars) today, and there is no meat, which has become a luxury product,” said Ayten Cagdas, a mother of two, outside a supermarket in Ankara’s residential neighbourhood.
Less than a year ago, the same amount of groceries would have cost around half of that money, she complained. “Our wages have been eroding against the inflation rate.”
“Let’s hope we don’t return to the 1990s,” she said. During that period, Turkey’s inflation rate hovered between 70 and 125 percent annually.– NNN-ANADOLU
