Turkey’s Annual Inflation Hits Two-Decade High of 85 Percent

Turkish lira banknotes are seen in this illustration taken in Istanbul, Turkey, on Nov. 23, 2021. Murad Sezer/Illustration/Reuters

Turkey’s annual inflation has hit its highest level in 24 years, worsening the cost-of-living crisis facing the country, even as political opposition parties claim that real numbers are worse than official figures.

The 12-month Consumer Price Index (CPI), which measures inflation on an annual basis, hit 85.51 percent in October, according to a press release from the Turkish Statistical Institute on Nov. 3. This is the seventeenth consecutive month that inflation has risen in Turkey. It is up by 3.54 percent from the previous month. The lowest inflation rate was in the communication and education sectors, which both rose by over 30 percent.

The transportation sector saw the highest annual inflation, at 117.15 percent; followed by food and non-alcoholic beverages at 99.05 percent; furnishings and household equipment at 93.63 percent; and housing at 85.17 percent.

Despite the high numbers, opposition members and many citizens question the accuracy of the data, and insist that the actual inflation rate is even higher.

According to independent economists from Turkey’s ENAG research institute, the 12-month CPI was at 185.34 percent in October. On a monthly basis, CPI is calculated to have risen by 7.18 percent for the month.

Opposition leader Kemal Kilicdaroglu insists that the Turkish government is hiding real inflation data due to the salary it owes to public employees.

“Why does the TUIK [statistics agency] disguise the real figure?” he asked last month, according to RFI. “Because when it gives the real figure, the pensions will be determined accordingly. Workers’ wages will be determined accordingly. Civil servants’ salaries will be determined accordingly. If you show it low, it will give a low raise.”

Erdogan’s Contradictory Policies

Many economists blame Turkish President Recep Tayyip Erdogan’s policies for having pushed the country into an inflation crisis. While traditional economic thought posits that raising interest rates will help control inflation, Erdogan believes that higher rates will result in higher prices.

As such, the Turkish president has been pushing to lower interest rates. In October, the country’s central bank slashed interest rates to 10.5 percent, the third straight monthly reduction. Erdogan has also indicated that he plans to implement more rate cuts and bring down rates to single digits.

Economists point out that the policy of raising interest rates is hurting the national currency lira and adding upward pressure on inflation.

Liam Peach, senior emerging markets economist at London-based Capital Economics, wrote in an analyst note that the Turkish central bank will continue to remain under pressure from the president to follow a “looser policy,” according to CNBC.

“Although the CBRT [Central Bank of the Republic of Turkey] said it will deliver one more 150 basis-point interest rate cut at its meeting later this month, there is a risk of further easing beyond that, adding more downward pressure onto the lira,” he said.