Turkey's inflation is flying to 73%, a 23-year high, as food and energy costs zoom

June 6, 2022: -Turkey’s inflation for May increased by an eye-watering 73.5% each year, as the country grapples with increasing food and energy costs and President Recep Tayyip Erdogan’s long-running unorthodox strategy on monetary policy.

Food prices in the populated country of around 84 million increased 91.6% year on year, the statistics agency reported of the country, which brings into sharp view the pain that regular consumers face as supply chain problems, increasing energy costs, and war in Ukraine feed into global inflation of Russia.

Turkey has had a rapid growth for years, but Erdogan has declined to raise the prices to cool down the resulting inflation, which describes himself as a sworn enemy of interest rates. The result has been a surging Turkish lira and far less spending power for the average Turk.

Erdogan instructed the country’s central bank to slash borrowing rates last year even as inflation rose repeatedly. Paramount bank chiefs who expressed opposition to this course of action were fired; by the spring of 2021, Turkey’s central bank had seen four different governors in two years.

“The laser focus on heterodox measures regarding conventional monetary policy will unlikely solve the inflation challenge, and we anticipate levels breaching 80% y/y in Q3-22,” Ehsan Khoman, director of emerging markets research for Europe, the Middle East, and Africa at MUFG Bank, wrote on Twitter after the release of figures.

Khoman added that he expects Turkey’s inflation to “stay north of 70% year by year until November because of the elevated commodity prices, rising domestic production costs, and a precipitously depreciating lira.”

“Turkey back in the inflation age of the 1990s. It looks as if Erdogan has lost his last econ credibility,” Holger Zschapitz, finance editor at German daily Die Welt, wrote on Twitter. “Erdogan’s unorthodox strategy for managing the country’s $790bn econ continued to backfire,” he wrote in another tweet.

The 73.5% figure for Turkey’s consumer price index is up from 70%.