Turkey reports annual inflation of 49 percent, highest in two decades

Duvar English - Reuters 

Turkey's annual inflation jumped to a 20-year high of 48.69% in January, according to data released on Feb. 3, fuelled by a series of unorthodox interest rate cuts and a crash in the lira currency late last year.

Month-on-month, consumer prices rose 11.1%, the Turkish Statistical Institute (TÜİK) said. 

The producer price index soared 10.45% month-on-month in January for an annual rise of 93.53%, in a reflection of the foreign exchange-related turmoil in recent months.

According to unofficial data from the ENAG Inflation Research Group, an independent institution set up in 2020 to track the country’s inflation, Turkey’s annual consumer price inflation rate was 114.87% in January, far higher than official claims. ENAG also said that prices in Turkey increased by 15.52% percent month-on-month in January.

The lira shed 44% of its value last year as the central bank slashed interest rates by 500 basis points, under a drive by President Recep Tayyip Erdoğan to prioritize credit and exports despite the double-digit price rises.

Partly in response to the currency turmoil, Turkey raised a series of administered prices this year including for gas, electricity, road tolls and bus fares, adding to inflationary pressure. The monthly minimum wage was hiked 50%.

Last month's inflation was driven by transport prices, which soared 68.9% year-on-year, while the heavily-weighted food and drinks prices jumped 55.6%, eating deeper into household earnings and savings.

The lira was trading at 13.5420 against the dollar after the data, some 0.4% weaker than its close on Feb. 2.