Turkey’s consumer inflation surged by a staggering 13.6 percent in December, bringing the 2021 annual rate to 36 percent — the highest under the 19-year rule of President Recep Tayyip Erdogan’s Justice and Development Party (AKP). 

The record rate, announced by the Turkish Statistical Institute on Monday, comes as a fresh blow to Erdogan’s economic credentials. Since September, the bank has cut its policy rate by 500 basis points in four months, instead of raising the rate to rein in prices, as conventional economics dictates. Erdogan insists on the unorthodox view that high interest rates cause high inflation.  

The hitherto highest inflation under the AKP was recorded in September-October 2018, when the year-on-year rate climbed to 25 percent. That surge followed political tensions with the Trump administration, which sent the lira plunging, soon after Turkey transitioned to an executive presidency system that concentrated power in Erdogan’s hands. The central bank at the time responded with rate hikes to cool the economy, reverting inflation to single digits in 2019.

But not so in 2021. The bank’s rate cuts pushed real yields on the lira deep into negative territory and fueled a rush for hard currency. In four months, the price of the dollar increased 59 percent, leading to sharp price increases in an economy that relies heavily on imports, including energy. Shortcomings in food supply — the result of structural problems in the agricultural sector, coupled with drought — proved another major factor.