Inflation is showing no signs of deceleration in Turkey as the consumer price index continued to grow higher in October 2022 signaling a severe crisis undergone by the Turkish economy. Official statistics say that inflation in Turkey touched a 24-year high of 85.51 percent in October 2022.
Continuous rate cuts by the Central Bank of Türkiye and unscientific economic policies followed by the government led by President Recep Tayyip Erdoğan are said to be the major reason inflation is skyrocketing in the Domestic Economy.
Data from the Turkish Statistical Institute states that the economy witnessed a 3.54 percent increase in consumer prices when compared to September 2022. The recent increase in inflation also amplifies the cost of the living crisis faced by Turkish citizens. High inflation in the economy will push the prices of essential commodities upwards which will force common people to reorganize and reprioritize monetary transactions.
Market analysts and economists are of the opinion that the actual inflation in the economy of Turkey is much higher than the official figures. According to the Inflation Research Group, an independent body of Economic researchers, annual inflation in Turkey is currently standing at 185 percent which is more than twice the amount of official figures.
Even though the recent energy crisis in Europe and high volatility in the global economy can be stated as reasons for high inflation in the economy, analysts believe that the economic policies of President Recep Tayyip Erdoğan are what made things worse in the Turkish economy.
The Turkish president had strongly stood against interest rate hikes as he believes that higher borrowing costs might increase the prices of commodities. Meanwhile, interest rate hikes are considered one of the most efficient monetary policy tool which can be used to bring inflation under control.
While central banks in other economies are following an aggressive interest rate hike policy, the Central Bank of Turkey is continuously slashing interest rates, pushing more money into the economy. As more and more money flows into the markets, demand for commodities increase, which in turn increase prices and hence causes inflation.
Even in the last month, the Turkish central bank slashed interest rates to 10.5 percent. A few days ago, the governor of the central bank admitted that the bank was not that much successful in bringing down inflation in the economy.
Admission of failure by the central bank governor doesn’t seem to change the mind of the president as he continues to claim that his economic policies are working and will be adopted by various economies in the near future. Mr Erdogan had earlier promised to bring down the interest rate to a single digit.