With a decision that caused surprising markets, as Turkey is in pre-election period ahead of March 31 municipal elections, the country's Central Bank raised its key lending rate by 500 basis points, from 45% to 50%. At the same time, it sent a signal that it will continue its policy of tightening liquidity if the outlook for inflation worsens further.
According to the Monetary Policy Committee (MPC) of the Central Bank of Turkey, “the main trend of monthly inflation in February was higher than expected, led by service sector inflation. While imports of consumer goods and gold slowed, helping to improve the current account, other indicators in the short term point to a continued resilient path in domestic demand.”
Rigidity in services inflation, inflation expectations, geopolitical risks and food prices keep inflationary pressures alive in Turkey, PPK notes.
This time last year, President Erdogan insisted that he had no intention of abandoning the low interest rate policy, believing that cheap money boosted growth and would in the long run solve the problem of leverage inflation caused by that policy. However, upon taking office after the presidential election last May, Turkish economy czar Mehmet Simsek announced a return to “rational policies”, effectively dismissing Erdogan's policies as disastrous. Since then, the lending rate which remained stable at 8% for 2 years and 3 months at 8.5% has reached 50% today.
Speaking today at a pre-election rally in Caesarea, Turkish President Recep Tayyip Erdogan said the biggest fight is against inflation and the mentality that raises the cost of living. “We will protect the income of our citizens from high inflation. We will do this by working, not by using fake numbers,” he said and promised that “inflation will decrease rapidly in the second half of the year.”
Earlier this month, the Turkish Statistical Service (TUIK) announced that the official annual inflation was recorded in the month of February at 67.07%. On a monthly basis, inflation in Turkey “runs” at 4.53%.
However, the reliability of the Turkish Statistical Service's data is widely questioned by economic circles and the opposition. The independent institute ENAG (Inflation Research Group), made up of several university economists, calculated the increase in the Consumer Price Index on an annual basis at 121.98%.
According to TUIK, the highest annual increase, with 94.78%, recorded in the catering and hospitality sector, followed by education with 91.84% and health with 81.25%, while the lowest was recorded in clothing and footwear with 43.44%. The domestic producer price index increased by 47.29% on an annual basis and by 3.74% on a monthly basis.
The annual inflation in the food and non-alcoholic beverage sector was recorded at 71.12% ( 8.25% month-on-month).
On a month-on-month basis, the industry with the lowest growth in February 2024, compared to the previous month, was also clothing and footwear at 0.20% , while the sector with the highest increase in February compared to the previous month was education with 12.76%.
SOURCE: ertnews.gr
