Turkey’s annual inflation rate has risen to a 19-year high, highlighting the country’s financial woes and raising concerns about the president’s policies.
The cost of transportation, food, and other essentials ate into household budgets in December, pushing prices up by more than 36%.
Most central banks have raised interest rates to combat inflation, but Turkey has taken the opposite approach.
As a result, the value of the lira has plummeted, as Tayyip Erdogan prioritises exports over monetary stability. The lira lost 44 per cent of its value against the dollar last year, and it lost another 4% on Monday.
Mr Erdogan has referred to interest rates as “the mother and father of all evils,” and he has taken more unconventional measures to cut costs, such as intervening in foreign exchange markets.
According to one expert, unless the monetary policy is altered, inflation might reach 50% by the spring.
Last year, Mr Erdogan changed the leadership of the central bank. Since September, the bank has reduced interest rates from 19% to 14%.
The lira’s subsequent depreciation has thrown family and corporate budgets into disarray.
Last month, images emerged of people in Istanbul queuing for subsidised bread, despite municipal officials claiming that the cost of living had increased by 50% in a year.
The central bank has claimed that prices are being driven by temporary reasons and predicted that it would conclude the year at 18.4% in October. To combat the lira’s depreciation, Mr Erdogan announced three weeks ago a system in which the government will protect converted local deposits from losses in hard currencies. The lira increased by 50% with the help of the central bank.
The currency then fell again last week, causing the president to issue a call on Friday for people to keep all of their savings in lira and move their gold into banks.
President Erdogan’s popularity has plummeted as a result of the economic upheaval, ahead of expected elections in mid-2023.