The Turkish government predicts higher inflation for the rest of the year.
The central bank released its 2022 inflation report today. In the report, the financial institution predicted that annual inflation will reach 60.4% by the end of the year, up from its previous forecast of 42.8%.
Why it matters: Inflation is rampant in Turkey and rose above 78% in June. The central bank called “supply shocks” from Russia’s invasion of Ukraine due to high inflation, particularly with regard to fuel, food and agricultural prices.
Indeed, raw material 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 oil and gas markets.
Many monetary institutions have raised interest rates this year to curb inflation. Saudi Arabia, for example, raised interest rates again yesterday. However, Turkish President Recep Tayyip Erdogan has long held the unorthodox view that raising interest rates leads to higher inflation. Turkey’s central bank has therefore kept its rates unchanged during the global inflation crisis.
Knowing more: The Turkish currency, the lira, fell to the region of 17.8 for the US dollar this week, approaching an all-time low since December last year.