Turkey’s inflation soars to 73%, a 23-year high, as food and energy costs skyrocket

A man sells slippers in Eminonu on May 5, 2022, in Istanbul, Turkey. The country has enjoyed rapid growth for years, but President Erdogan has for years refused to meaningfully raise rates to cool the resulting inflation. The result has been a plummeting Turkish lira and far less spending power for the average Turk.

Turkey's inflation for the month of May was the highest in 23 years, as the country grapples with soaring food and energy costs.

The country's statistics agency reported that food prices in the country rose 91.6%, bringing into sharp view the pain that regular consumers face as supply chain problems and Russia's war in Ukraine feed into global inflation.

Turkey has enjoyed rapid growth for a long time, but Erdogan has refused to raise rates to cool inflation, which he describes as an enemy of interest rates. The Turkish lira has plummeted and the spending power of the averageTurk has fallen.

The central bank slashed borrowing rates multiple times last year despite the fact that inflation continued to rise. Turkey's central bank had four different governors in two years after the chiefs who were against this course of action were fired.

Turkish lira and U.S. dollar

The Turkish president promised to deliver a new economic model that would bring about a boom in export wealth and then tackle inflation by getting rid of Turkey's longstanding trade deficit. High costs for energy imports that need to be paid in dollars are putting pressure on the economy because of the weakness of the lira.

Turkey's inflation will only get worse according to economists.

The laser focus on Heterodox measures over conventional monetary policy will not solve the inflation challenge and we anticipate levels breaching 80% y/y in Q3-22.

Turkey's inflation is expected to stay north of 70% y/y until November due to a confluence of elevated commodity prices, rising domestic production costs and a precipitously depreciating currency.

Turkey was in the inflation age of the 1990's. Holger Zschapitz is the finance editor at German daily Die Welt. He wrote that the unconventional strategy for managing the country's $790 billion econ continued to fail.

Turkey's consumer price index increased from 70% to 73.5%.