Turkish inflation climbs to nearly 65%, with more rises expected

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A tram passes shoppers as it travels along Istiklal Street in the Beyoglu district of Istanbul, Turkey, on Tuesday, Dec. 19, 2023.

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As inflation eases in most of the world’s major economies, eye-watering price rises continue to blight citizens in Turkey.

Inflation in the country rose to 64.8% on an annual basis in December, an acceleration from 62% in November. This was slightly below expectations of economists polled by Reuters of 65.1%. Month-on-month inflation cooled to 2.9% from 3.3%.

Turkish inflation hit a peak of 85.5% in October 2022. The Turkish lira saw a steep deterioration, increasing the cost of imports and eroding the salaries of the country’s many foreign workers sending money abroad.

That came as Turkey’s central bank stuck to a controversial monetary policy of lowering interest rates, spearheaded by President Recep Tayyip Erdogan.

However, the central bank made a sharp pivot in June when it began hauling rates higher under its new Governor Hafize Gaye Erkan. They have since been lifted from 8.5% to 42.5%.

The last central bank meeting in December delivered a 250 basis point hike, smaller than the recent run of 500 basis point rises.

Nicholas Farr, emerging Europe economist at Capital Economics, said in a research note at the time that the central bank had not closed the door on its tightening cycle. He also forecast one more 250 basis point hike at its next meeting on Jan. 25.

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