This article was produced by colleagues at the BBC.
In Ankara, Turkey, Ellen and Umit Karaduman have their hands full. Raising 3-year-old twin boys is a job in itself, but the couple also work as office workers. Eren works as a human resources officer for the city’s water company, and Umit is employed by the Turkish National Railways.
Although the income is stable, the situation is difficult. Turkey has long struggled to contain inflation, which last month exceeded 60%. The traditional cure for high inflation is to raise interest rates. Turkey’s central bank raised interest rates again on Thursday, with Turkey’s current interest rate now at 42.5%.
Soaring prices mean the extent to which wages for Karadumans and others in Turkey rise is constantly changing. According to Ellen, prices are constantly rising, especially in supermarkets.
“Our budget is always in the negative,” she said.
Ellen added that the family was spending 90 percent of their income on debt repayments, and Umit said prices have been so high for so long that they have no choice but to pay with credit cards or take out separate loans to buy anything.
“We are trying to overcome inflation through spending,” he said. “Even if we don’t need something, we take out a loan and buy it on a credit card. We’re trying to survive by spending. That’s our goal.”
Turkey’s annual inflation rate peaked at 85.5 percent last fall and only began to ease after interest rates began rising in June after President Recep Tayyip Erdogan was re-elected and listened to voters who said the economy was their top concern.
President Trump has long loathed high interest rates, calling them the “root of all evil,” but over the past six months he has tolerated higher interest rates, which help keep inflation in check but also make borrowing more expensive.
“This is certainly a bitter pill to swallow until we see a decline in inflation and an improvement in purchasing power,” said Selva Demiralp, a former economist at the Turkish Federal Reserve and now a professor of economics at Kochi University in Istanbul. says. “Unfortunately, this is a painful process that we will go through.”
Karaduman said that the rise in interest rates, which is the centerpiece of the current economic recovery, is having the effect of suppressing inflation and cooling demand in the economy. But this is a slow process and not without risks. For the Karaduman family, a permanent return to normalcy in the economy will be a welcome change.
“Today, at least for now, we are among the lowest income groups. But in the future, perhaps this will change,” Umit said. “There is very little middle class left in Turkey. It almost doesn’t exist. You are either poor or rich.”
Families cannot solve Turkey’s economic problems, but they can adjust their finances and hope that prices will soon come down.
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