Turkey’s inflation is accelerating for the sixth consecutive month
Turkey’s inflation accelerated in March for the sixth month in a row as a weak lira raised the cost of imports as the country’s new central bank governor made it difficult for President Recep Tayyip Erdogan to fulfill his desire to ease monetary policy.
Consumer prices rose by 16.19% year-on-year, in line with the expectations of economists surveyed by Reuters. The month-on-month increase was 1.08 percent, driven by increases in transportation and white goods, the state statistics agency said Monday.
Turkey’s inflation rate has been stuck in double digits for the past three years, and central bank governor Sahap Kavcioglu has left the dilemma.
Kavcioglu was often named last month by Erdogan it required lower borrowing costs to boost economic growth. According to the analysis, the reduction in rates runs the risk of fueling inflation and threatening to damage the value of the pound.
“The amortization pressure on the local currency confirms the need for the central bank to maintain a tight monetary policy,” wrote Enver Erkan, an economist at Tera Securities, in a research note after publishing inflation data.
“[High] Interest is the most useful tool in terms of price stability, even if it has a slower impact on the real economy, ”he said.
The numbers are unlikely to make Kavcioglu cut interest rates at the upcoming monetary policy committee meetings this month and in May, and Erkan can also point out that the policy will remain tight.
The next meeting to set bank rates will be on April 15th.
The lira fell 13 percent against the dollar from Erdogan he removed Kavcioglu’s previous hawk from office Naci Agbal spent the night at midnight last month, raising rates to 19 percent and two days later to control inflation and boost the lira.
The Turkish currency has lost more than a fifth of its value in the last year against the US dollar. This has increased the cost of imports, including intermediate goods demanded by the country’s manufacturers.
Producer prices rose 4.13% last month, up 31.2 percent year-on-year, the statistics office said. This suggests that higher inflation rates will continue to rise as higher production costs are passed on to consumers.
Rising oil prices are also a factor, as Turkey imports almost all of the energy it consumes.
Kavcioglu, a journalist and academic journalist, is the head of Turkey’s fourth central bank in less than two years. He has defended Erdogan’s view, saying that high interest rates drive inflation, as opposed to the main economic theory.
However, Kavcioglu has stated that it will not immediately repeal the previous policy, and has pledged that the central bank will commit to a 5 per cent compliance with the year-end CPI.