Turkey’s war on inflation pays off with second drop in a row
The government launched an ‘all-out fight against inflation’ as the lira fell by more than 28% in value against the dollar in 2018
Ankara — Turkish inflation dropped for the second month in a row, to an annual rate of 20.3% percent after hitting a 15-year high in October, official statistics showed on Thursday.
Thousands of Turks protested in Istanbul in December against crippling inflation as the economy struggled following a currency crisis in August.
The government launched an “all-out fight against inflation” as the lira fell by more than 28% in value against the dollar in 2018.
In October, consumer prices were 25.24% higher than in the same month a year earlier, the highest level since 2003.
That figure eased to 21.62% in November and the level in December was below a Bloomberg forecast of 20.5% though still far above the central bank target of 5%.
On a monthly basis, consumer prices eased in December by 0.4%, the Turkish statistics office said.
But compared with a year earlier, furnishing and household goods were 31.36% more expensive, while food and non-alcoholic drinks were up 25.11%, the data showed.
The lira stood at 5.44 against the US dollar after the figures were released, gaining nearly 2.8% in value on the day.
In early January 2018, it took about 3.75 lira to buy one dollar.
Turkish finance minister Berat Albayrak has said the fight against inflation will continue through the first three months of 2019 and include cuts on a special consumption tax and VAT.
The Union of Chambers and Commodity Exchanges of Turkey head Rifat Hisarciklioglu urged the private and public sectors to co-operate in the battle against rising prices.
“Neither the public nor the private sector can do this alone. The responsiblity and duty is all of ours,” he said on Wednesday.
The focus now shifts to the central bank and whether it will cut interest rates when its monetary policy committee meets on January 16.
In September, the central bank raised its main interest rate, the the one-week repo rate, by 6.25 percentage points to 24%.
President Recep Tayyip Erdogan has criticised such hikes, going against economic orthodoxy to claim that higher rates fuel inflation.
He described them at one point as the “mother and father of all evil”.