Erdogan takes steps to fight inflation in Turkey reaching 83% after 24 years

“This is the highest inflation since World War II”, Hakan Kara, a former chief economist at the Turkish Central Bank

Inflation Research Group estimates the annual rate as 186.27 percent.Accommodation, food, and shipping prices have risen the greatest. Transportation had the largest yearly price inflation in Turkey at 117.66%, followed by food and non-alcoholic beverages at 93%.

Several factors have caused a fast rise in global pricing. Covid supply difficulties and the Ukraine crisis have raised energy and food prices. RecepTayyip Erdogan lowered interest rates in 2015 to boost Turkey's economy. Most central banks raised interest rates to combat inflation in Turkey. Since November of last year, inflation has risen owing to the dropping value of the lira, induced by the central bank reducing the policy interest rate as part of an unorthodox easing cycle TayyipErdogan has long sought.

Erdogan calls interest rates "the mother and father of all evil," and his economic plans include foreign currency market involvement. Tayyip Erdogan's ruling party must overcome soaring inflation in Turkey and the ongoing economic turmoil to win next year's election.Erdogan instructed the central bank to cut its policy rate at the next meetings, a day after stating he expects interest rates to drop to single digits by year's end. TayyipErdogan indicated the day before he anticipates single-digit interest rates before the end of the year.

Due to December's cut in interest rates from 19% to 14%, the Turkish lira's value has decreased, making it extra expensive for the state to acquire foreign items. The Turkish lira's value against the dollar declined to 18.56.

According to numbers released Monday, Turkey's annual inflation hit 83.45% in September. Despite being a 24-year high, it's lower than expected after the Turkish central bank dropped interest rates twice in two months. Consumer prices rose 3.08% month-over-month, less than the 3.8% expected by a survey. Consumer price inflation was predicted to reach 84.63% annually.This was the highest annual rate since July 1998, when Turkey was fighting to halt a decade of chronically high inflation.

The previous year's rate cuts caused a currency crisis, resulting in a 44% decrease in the Turkish lira's value versus the dollar in 2021. This year, it plunged 29%, reaching new lows.

  • Consumer prices rose 3.08% month over month and 83.45% year on year.
  • Domestic producer price index increased 4.78 percent month on month and 151.5% year on year. 
  • Inflation in Turkey, a country of 84 million people, has surged in the previous two years, in part because Turkish President RecepTayyip Erdogan refuses to hike interest rates to control inflation.

Officials from the government, who maintain that they are working toward a new economic model, have claimed that price increases will begin declining in the final months of 2022, despite the fact that they raised their year-end forecast by 65% over the course of the weekend. They argue that this will prove that they are successful in their efforts. The government thinks that its economic policy, which puts a lot of emphasis on keeping interest rates low in order to boost manufacturing and exports and create a current account surplus, will cause inflation to go down.