The Turkish government is predicting higher inflation for the rest of the year.
The central bank released its Inflation Report for 2022 today. In the report, the financial institution predicted year-end annual inflation will reach 60.4%, up from the previous prediction of 42.8%.
Why it matters: Inflation is running rampant in Turkey, rising above 78% in June. The central bank cited “supply shocks” resulting from the Russian invasion of Ukraine for the high inflation, specifically with regard to fuel, food and agricultural prices.
Indeed, commodity prices are rising across the region. Ukraine and Russia are both major wheat exporters to the Middle East, and the war has also disrupted global supply chains, including in the oil and gas markets.
Many monetary institutions have raised interest rates to counter inflation this year. Saudi Arabia raised rates again yesterday, for example. Turkish President Recep Tayyip Erdogan, however, has long held the unorthodox position that raising interest rates leads to higher inflation. Turkey’s central bank has therefore kept its rates unchanged during the global inflationary crisis.
Know more: Turkey’s currency, the lira, fell to the region of 17.8 to the US dollar this week, nearing an all-time low from last December.