Turkey’s inflation surges to 20-year high of 70 per cent in April

Turkey’s annual inflation jumped to 69.97 per cent in April, above forecast and at a two-decade high, according to data on Thursday, fuelled by the Russia-Ukraine conflict and rising energy and commodity prices after last year’s lira crash.

The currency slide was triggered by a 500 basis point-easing cycle which began last September under pressure from President Tayyip Erdogan, triggering the sustained surge in consumer prices.

Month-on-month, consumer prices rose 7.25 per cent, the Turkish Statistical Institute said, compared to a Reuters poll forecast of 6 per cent. Annually, consumer price inflation was forecast to be 68 per cent.

The surge in consumer prices was driven by a 105.9 per cent leap in the transportation sector, which includes energy prices, and a 89.1 per cent jump in food and non-alcoholic drinks prices, the data showed.

Month-on-month, food and non-alcoholic drink prices rose the most with 13.38 per cent and house prices rose 7.43 per cent.

The government has said inflation will fall under its new economic programme, which prioritises low interest rates to boost production and exports with the goal of achieving a current account surplus.

However, economists see inflation remaining high for the rest of 2022 due to the Ukraine war, with the median estimate for inflation at year-end standing at 52 per cent. The current account deficit has also widened sharply at the start of the year.

Last week’s Reuters poll showed annual inflation was expected to be 52 per cent by year-end.

Inflation has continued to rise despite tax cuts on basic goods and government subsidies for some electricity bills to ease the burden on household budgets.

Last week the central bank forecast annual inflation will peak at around 70 per cent by June before declining to near 43 per cent by year-end and single digits by end-2024.

The central bank held its key policy rate steady at 14 per cent in four meetings this year and said measures and policy steps will prioritise so-called liraization in the market.

The domestic producer price index climbed 7.67 per cent month-on-month in April for an annual rise of 121.82 per cent.