Turkey’s annual inflation climbed to a new 24-year high of 80.21% in August, slightly below expectations according to official data, after the central bank unexpectedly cut interest rates and triggered a cost-of-living crisis.
Inflation has risen higher since last autumn, when the lira fell after the central bank gradually cut its key interest rate by 500 basis points to 14% in an unorthodox easing cycle pursued by President Tayyip Erdogan.
Despite expectations that inflation is not expected to fall in the coming months, the bank cut its key interest rate by another 1[ads1]00 basis points last month to 13%, citing indications of an economic slowdown.
Month-on-month, consumer prices rose 1.46%, the Turkish Statistical Institute said, compared with a Reuters poll forecast of 2.0%. Annual consumer price growth was estimated at 81.22%.
It was the highest reading since August 1998, when annual inflation was 81.4% and Turkey was struggling to end a decade of chronically high inflation.
The highest annual inflation was seen in transport, where prices rose by 116.87% year-on-year, despite prices in the sector falling 1.78% month-on-month. In the key food and soft drinks sector, prices rose by 90.25%.
The data had little impact on the lira, which traded at 18.2250, unchanged from early levels.
The economic fallout from Russia’s invasion of Ukraine has also created inflation this year, in addition to the continued decline of the lira. The currency fell 44% against the dollar last year, and is down more than 27% this year.
The domestic producer price index rose 2.41% month-on-month in August to an annual increase of 143.75%.
The government has said inflation will fall with its economic program that prioritizes low prices to increase production and exports with the aim of achieving a current account surplus.
According to government forecasts released on Sunday, Turkey expects inflation to slow to 65% by the end of the year.
The Reuters survey showed that the annual CPI was seen falling to just under 71% by the end of 2022. Surveys show that Turks believe inflation is far higher than official data.