Official data released today by Turkey’s authorities reveals that the country’s Consumer Price Index (CPI) surged to a year-on-year rate of 61.53% in September. This figure closely aligns with the 61.7% forecast made by analysts in a Reuters poll and marks the third consecutive month of inflationary increases. The spike in inflation is attributed to recent tax hikes and the continued depreciation of the Turkish lira.
In comparison to the previous month, Turkey’s consumer inflation rate experienced a significant 4.75% increase in September.
Turkey has faced mounting inflationary pressures, with the rate surging to over 85% last year following a sharp reduction in policy rates, which triggered a steep devaluation of the lira in late 2021.
President Recep Tayyip Erdogan, who won re-election last May, has initiated a shift in the country’s economic strategy. This includes the appointment of a new economic committee that will adopt a more stringent fiscal policy to address the inflationary challenges.
However, the Turkish lira has depreciated by 26% since the election, reaching a value of 27.5005 lira to the US dollar as of today. Economists and government officials anticipate that inflation could rise to approximately 70% by the end of this year and increase further to 75% in May of the following year before beginning a gradual decline.
Turkey’s central bank has reacted to these economic challenges by raising its policy interest rate to 30% in September. This marks the fourth consecutive month of monetary tightening, with the central bank having increased interest rates by a total of 21.50 percentage points since June in its battle against inflation.
Following these policy adjustments, S&P Global Ratings recently upgraded Turkey’s credit rating outlook from negative to stable. This shift aims to address the concerns of economic overheating and maintain stability in the exchange rate.
Today, Hafise Gaye Erkan, the new Governor of the Central Bank of Turkey, is scheduled to address parliament, providing insights into the central bank’s strategies to address inflation and restore economic stability.
Incidentally, data from the Turkish Statistical Institute indicates that the domestic Producer Price Index (PPI) experienced a year-on-year increase of 47.44% in September, with a 3.40% month-on-month rise.