May 5, 2022
Image source, Getty Images
Consumer prices in Turkey rose nearly 70% year-on-year in April, hitting a 20-year high, official figures showed.
The sharpest increases in annual inflation were recorded in transport, food prices and home furnishings, with transport costs more than doubling over the year.
Countries around the world are facing a growing cost of living crisis.
But Turkey’s problems have been exacerbated by the president’s reluctance to raise interest rates, a commonly used measure to curb inflation.
The cost of food and non-alcoholic beverages increased by 89.1% over the year, while furniture and household equipment increased by 77.64%.
Turkey’s lira has plummeted in value as President Recep Tayyip Erdogan prioritizes exports over currency stability.
President Erdogan has described interest rates as the “father and mother of all evil” and is trying to keep prices down using more unconventional policies, such as intervening in foreign exchange markets.
Facing pressure from Turkey’s president, the country’s central bank has cut interest rates from 19% to 14% since September.
In April, the central bank kept interest rates unchanged for the fourth consecutive month despite soaring inflation.
image captionTuba Kamporat says her family is struggling to cope with rising prices
Tuva Kampolat, a former medical worker living in Istanbul, said her family was struggling to make ends meet solely on her husband’s salary. He works in construction.
She was planning to go back to work after three months of maternity leave, but she couldn’t afford childcare because prices were so high.
“I receive so-called unemployment benefits in Turkey, but the amount is so small that it doesn’t even meet my baby’s monthly diaper needs,” she told the BBC.
“I’m looking for small jobs that I can do online. But for now, it’s impossible to live on a salary of 5,000 Turkish liras with a rent of 3,000 to 4,000 Turkish liras.”
Tuba said she has been forced to buy cheaper diapers for her baby and change them less frequently, while food costs have also skyrocketed.
“We cannot bear it. In fact, we are surviving thanks to the support of our families,” she added.
“Strange monetary policy”
Charlie Robertson, global chief economist at Renaissance Capital, said the disruption caused by the war in Ukraine was contributing to the rise in prices, including for groceries.
But he said much of the root cause of high inflation was “Turkey’s very strange monetary policy.”
Image source: Getty Images
image captionPresident Erdogan is seeking re-election next year
But Jason Tubey, an emerging markets economist at Capital Economics, said there was “no sign that policymakers are going to reverse policy and raise rates,” adding that inflation has remained close to current high rates for most of this year. I expected it to stay.
Prices are rising rapidly around the world, with energy and food prices soaring due to factors such as coronavirus-related supply shortages and the war in Ukraine.
Many countries have responded by raising interest rates and encouraging citizens and businesses to borrow and cut spending in an effort to curb inflation.
Countries such as India and Australia are also raising borrowing costs.
