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Turkey’s inflation rose to a 24-year high of 79.6% in July, although prices rose less than expected, data showed on Wednesday, as the lira continued to weaken and global energy and commodity costs pushed up prices.
Inflation began to soar last fall, when the lira tumbled after the central bank gradually cut its policy rate by 500 basis points to 14 percent in the easing cycle sought by President Tayyip Erdogan.
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Consumer prices rose 2.37% month-on-month in July, the Turkish Statistical Office said, lower than the 2.9% forecast in a Reuters poll. Annually, consumer price inflation is projected to be 80.5%.
With energy inflation falling sharply and food inflation appearing to be nearing a peak, annual inflation may be approaching its peak, said Jason Tuvey, senior emerging markets economist at Capital Economics.
“Even if inflation is near its peak, it will remain near current very high levels for the next few months,” Tuvey said in a note.
“A sharp and disorderly fall in the lira remains a major risk,” he said.
The biggest annual increase in consumer prices was in the transportation sector, up 119.11 percent, while food and non-alcoholic beverages prices rose by 94.65 percent.
The economic fallout from Russia’s invasion of Ukraine and the continued devaluation of the lira have further contributed to inflation this year. Last year, the currency lost 44% of its value against the dollar, and this year it has lost another 27%.
The lira was flat against the dollar at 17.9560 after the data. It touched an all-time low of 18.4 in December.
Annual inflation is now at its highest level since September 1998, when it hit 80.4 percent, as Turkey struggles to end a decade of chronically high inflation.
Annual inflation is expected to fall to around 70% by the end of 2022, a Reuters poll last week showed, a pullback from current levels as the base effect of last year’s price surge takes effect.
In July, the domestic producer price index rose by 5.17% month-on-month and 144.61% year-on-year.
The government said inflation would fall due to its economic plan, which prioritizes low interest rates to boost production and exports, and aims to achieve a current account surplus.
Erdogan has said he expects inflation to fall to an “appropriate” level in February-March next year, while the central bank last Thursday raised its forecast for the end of 2022 to 60.4 percent from 42.8 percent previously.
The bank’s inflation report showed inflation is expected to hit nearly 90% this fall before easing.
Opposition lawmakers and economists have questioned the reliability of the Turkish Statistical Institute (TUIK) data, claiming the TUIK has dismissed it. Opinion polls show Turks believe inflation is much higher than official figures.
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