Turkey’s annual inflation passes 80% after interest rate cut

Sep 4, 2022, 1:06 PM | Updated: Sep 5, 2022, 1:07 am

ISTANBUL (AP) — Turkey’s annual inflation passed 80% in August, according to official data on Monday, further hitting consumers facing high energy, food and housing costs.

The Turkish Statistical Institute said consumer prices rose by 80.21% from a year earlier, up 0.6 percentage points from the previous month.

Independent experts say inflation is much higher than official statistics. The Inflation Research Group put the annual rate at 181%.

The central bank unexpectedly cut interest rates to 13% in August despite rising prices, a plunging lira and an unbalanced current account. The central bank slashed interest rates by 5 percentage points between September and December last year. The rate then stayed at 14% until last month.

Russia’s invasion of Ukraine and the lira’s decline have stoked inflation. The lira has plunged over 50% against the U.S. dollar since the central bank began cutting rates.

Economists say rising inflation in Turkey is fuelled by President Recep Tayyip Erdogan’s unorthodox belief that high borrowing costs lead to higher prices — the opposite to established economic theory.

The government says it hopes to lower interest rates to boost production and exports in a bid to reach a current account surplus.

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Turkey’s annual inflation passes 80% after interest rate cut