Turkey’s inflation hit two-decade high of 78.62% in June

Inflation in Turkey in June surged to an annual rate of
78.62%, the highest in 24 years, according to official data released on July 4,
as President Recep Tayyip Erdogan’s unconventional economic policies continued
to take their toll.

The data released by Turkey’s state statistics agency was
the highest since January 1998. The consumer price index saw a rise of 4.95% on
a monthly basis, according to the Turkish Statistical Institute (TurkStat).
Inflation had stood at 73.5% in May and a 15.0% at the start of last year.

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On Friday, Minister of Economy Nureddin Nebati attempted to
head off criticism of the government’s handling of the economy, saying that
consumer prices will start falling by the end of the year. “I promise to you
and to the president, we will see a drop in inflation starting in December,”
Nebati said.

 The headline
inflation was driven by a 123.4% jump in the cost of transportation and a 94%
increase in non-alcoholic drinks, as per the data.

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The price of household goods increased by 81.8%, the
statistics agency reported. Turkey’s economic crisis started when Erdogan
forced the central bank to go through with a series of interest rate cuts last
year.

The policy rate went down despite surging consumer prices
but the Turkish government rejects conventional economics and affirms that
high-interest rates cause prices to rise.

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On Friday, Turkey substantially raised the minimum wage for
the second time in a year to cushion the blow on households. The increase in
the net monthly take-home salary to 5,500 liras ($330) means the nominal
minimum wage has almost doubled since the end of last year. It stood at 2,826
liras in late December 2021 and 4,253 liras in January 2022.

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President Erdogan has claimed that Turkey’s problem is not
inflation. “We do not have an inflation problem. We have a cost of the living
problem,” he said last month. Economists warned that substantially increasing
the pay of a large swathe of the population is an inflationary measure that
should be accompanied by interest rate hikes or other methods of limiting
spending. According to the official data, more than 40% of Turks earned the
minimum wage at the start of the year.