The Turkish central bank, or rather Erdogan, last week decided to cut interest rates in an attempt to revive the economy, despite strong inflationary expectations.
The move was not unexpected, but it certainly did not help to stop inflation which now appears to be galloping, nor the devaluation of the Turkish lira.
The consumer price index is now around 20%, which for a theoretically European country is a great deal. Even more worrying is the devaluation of the Turkish lira, even against the Euro which is not experiencing one of its most flourishing moments.
The effects are being seen in the economy in general, with hyperinflationary flares: as Sky reports , prices had already risen during the pandemic. Over the past 18 months, while packaged goods have seen availability decrease, and prices have gone up, but there wasn't a single empty shelf. Compared to the Western world, the Turks prided themselves on not having to fight for toilet paper or face masks. Today the recent change in interest rate policy and the unorthodox economic strategy are impacting citizens. As Guldenay Sonumut reveals, “A bottle of wine I bought the day before had gone up by 15%. It's hard to keep up ”. Ibrahim Koksal is a small shop owner in Yeniköy. which sells everything from cigarettes to batteries, as well as fast food. He has owned the small shop since 1993 and admits that price increases have affected him, his family, his business and his customers. "I can't dump this morning's 10% increase on the chicken and cheese I use in my sandwiches." The effect is just that, the price increase of the day before is not loaded on the sandwiches. The site that sells Apple in Turkey has stopped online sales of iPhones and other expensive products due to the risk of not being able to adjust prices in time.
Meanwhile, Erdogan's government allies speak of the opportunity to "get rid of high interest rates".
Erdogan Ally Bahceli: Central Bank Independence Must be Debated. Says "Turkey should be free of interest rate burden… Tight monetary policy would hurt economy" more than the impact of lower rates or lira weakness
They really want hyperinflation
– zerohedge (@zerohedge) November 23, 2021
As long as the discourse is to "Free the country of interests" then we will have an openly inflationary policy, which seeks inflation and devaluation. These will be very turbulent times in Ankara.
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-lira-turca-affonda-inflazione-alle-stelle-ma-se-la-sono-cercata/ on Thu, 25 Nov 2021 07:00:04 +0000.