Inflation in Turkey reaches 83% following Erdogan pledges to cut the interest rates

October 4, 2022: -On Monday, Inflation in Turkey grew to a 24-year high of over 83% for September, the country’s official body for statistics reported.

Monthly consumer prices grew by 3.08% and every year by 83.45%. The domestic producer price index was higher than 4.78% from the last month and a whopping 151.5% year by year.

Inflation for 84 million people has been soaring in the previous two years, particularly as Turkish President Recep Tayyip Erdogan insists on cutting the interest rates instead of raising them after deviating from the conventional way of controlling inflation.

“My biggest battle is against interest—my biggest enemy interests. We lowered the interest rate to 12%. Is that enough? It is not enough. This needs to come down further,” Erdogan stated last month.

In the previous two months alone, Turkey’s central bank, seen as under the control of Erdogan, cut rates by 200 basis points to 12%, which shocks markets. The Turkish lira is trading at a record of 18.56 to the dollar and has lost roughly 28% of its value in comparison with the greenback this year.

Turkish officials say their measures will bring inflation down in the coming months, but many economists disagree and expect consumer prices to rise. The lira is to come down further into the coming year.

“With external money conditions tightening, the risks remain skewed to sharp and disorderly decreasing in the lira,” Liam Peach, a senior emerges markets economist at Capital Economics, wrote following Turkey’s final rate cut on September 22.