Hyperinflation in Turkey beats a rate. Not to mention that this ultra-accommodative central bank policy is helping to amplify inflation that has become extreme. Consumer price inflation reached 85.5% year on year in October, the highest since 1998.
Could Turkey bear this hyperfinlation?
The most impacted positions according to Tuik (the official statistics office), would be those of transport, which shows an increase of 117% over one year, food (+99%) and housing (+85%). Spending centers that are particularly affected by the rise in energy prices and the fall in the pound.
These impressive official figures are, however, disputed by independent economists from the Inflation Research Group (Nage). The latter, against Erdogan’s monetary policy, claim that prices have risen by 185% over the year – including 115% since January 1.
Despite very high inflation, on November 2, the Turkish President was pleased with the good health of the Turkish economy: “Thank God, the wheels of our economy are turning. Our economic model, which we have summarized as growth through investment, employment, production, export and current account surplus, is bearing fruit,” he said.
Hyperinflation in Turkey: until when?
Turkey is not the only country to delay raising its key interest rates. In Japan too, the Central Bank (BoJ) persists in maintaining an ultra-accommodative policy, characterized by its negative rate of 0.1% on banks’ deposits with it (to encourage them to lend more) and its unlimited purchases of Japanese government bonds to cap their ten-year yields at 0.25%. However, the country is also experiencing inflation which is accelerating even if, at 3%, it remains well below the levels reached in Turkey or within the euro zone (the 19 countries to have adopted the single currency) where it peaked in October at 10.7% over one year. In this context, Turkey remains an exception.