Turkish Inflation Hits Highest Since 2002 as Lira Crashes

Consumer prices in Turkey soared by the fastest pace in 19 years in December, driven by a crashing lira and President Recep Tayyip Erdogan’s unorthodox monetary policy stance.

Annual consumer inflation rose to 36.08 percent last month, up sharply from 21.31 percent in November and the highest since September 2002, according to data from the Turkish Statistical Institute.

Food prices which make up a quarter of the consumer basket went up by 43.8 percent, well above the official estimate of 23.4 percent. Transportation, also a major component of the basket, went up the most 53.66 percent.

Turkey’s central bank has slashed its key interest rate by 500 basis points since September under Erdogan’s influence, sending the lira on a downward spiral that fueled the rise in prices.

Erdogan has aggressively pushed for lower borrowing costs, blaming high interest rates for restricting overall spending and stunting Turkey’s economic growth.

The lira is currently 31 percent weaker against the dollar than it was in September before the central bank began cutting interest rates.

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