Türkiye: inflation is back to close to 60%. Problems for Erdogan
It seems that the restrictive policy of the Turkish Central Bank is not helping much, at least from the point of view of inflation.
Turkey 's annual inflation rate accelerated for the second consecutive month to 58.9% in August 2023 from 47.8% in July, beating market expectations of 55.9%.
This is the highest value since December last year, mainly attributed to increases in tax rates, rising food prices and the depreciation of the lira.
Food inflation reached an 8-month high at 72.9% (up from 60.7%). Further upward pressure came from housing and utilities (25% vs 19.3%), transportation (70.2% vs 43.4%), furniture, appliances (58.9% vs 50.1%) and healthcare (77.6% versus 75.9%).
In addition, the core rate rose to a nine-month high of 64.9% in August, up from 56.1% the previous month. On a month-to-month basis, consumer prices rose 9.1%, following a 9.5% increase in July. The Turkish central bank also revised its inflation forecast to 58% this year, to 33% in 2024, and expected a gradual reduction to 15% by 2025.
Here's a year-over-year chart
The effect of the sharp increase in interest rates applied by the Central Bank of Turkey failed to achieve the desired effect, Yet the latest sharp increase in interest rates, which brought the level to %, had an effect
It seems clear that the Central Bank's move is not having an effect and that, even if they are sorry, Fisher and the monetarists confirm that they are wrong: interest rates do not regulate inflation directly. This is also confirmed by the fact that the core economy is one of the drivers of the price increase in Turkey.
Furthermore, despite the interest, we have that the exchange rate with the dollar has not improved particularly, indeed it seems that the effect of interest has now exhausted.
The fact that food inflation is very high will certainly create social problems in the country and could also explain Erdogan's desire to see the Black Sea reopened to the traffic of cereals from Russia and Ukraine.
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The article Turkey: inflation is back close to 60%. Problems for Erdogan comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/turchia-inflazione-erdogan-interessi/ on Mon, 04 Sep 2023 15:49:51 +0000.