In Turkey, money is losing its value more and more.

In October, according to official information, the inflation rate of consumer prices rose from Wednesday to 19.89 percent compared to the same month last year.

Although this is below the value of 20.4 percent previously estimated by analysts, it marks the highest level since spring 2019.

Andreas Mihm

Business correspondent for Austria, East-Central and Southeastern Europe and Turkey based in Vienna.

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The Turkish Statistical Office blamed higher prices for food, services, housing and transport, but also the rising costs of energy imports, for the renewed rise in the cost of living. According to official reports, food prices were more than 27 percent above the level of October 2020, while producer prices rose by 43 percent.

With one interruption, consumer prices have risen every month since October last year.

At that time the rate of increase was still below 12 percent.

Only last week the central bank raised its inflation expectation for the end of the year to 18.4 percent.

However, it is moving further and further away from the official target of its monetary policy, an inflation rate of 5 percent.

Critics accuse the central bank of the fact that falling rather than rising interest rates accelerate instead of slowing down monetary devaluation.

Erdogan wants more commitment to lower inflation

Under pressure from President Recep Tayyip Erdogan, who rejects high interest rates because they inhibited growth, the central bank recently reduced the key rate to 16 percent. The consequence is a further weakening of the national currency, the lira. That helps the export economy because it becomes more competitive in the international market.


At the same time, Turkey has to spend more and more lira on imports, calculated in euros and dollars, which in terms of value usually far exceed the sum of exports, and the current account is in deficit.

As a result, Turkish private and state foreign currency borrowers have to spend more and more lira on interest and repayments in dollars and euros. On Wednesday, one dollar cost 9.68 lira, more than three times as much as five years ago.

Nevertheless, a further rate cut is expected this year.

Erdogan had already replaced the head of the central bank several times because he disliked its policies.

In order to counter the growing resentment in the population about the disproportionately rising prices such as for food, the government is now considering aid for poorer sections of the population.

According to a Reuters report, this includes an increase in the minimum income as well as concrete help against the rapid rise in oil, gas and electricity prices.

But the planned fiscal incentives could also lead to price pressure growing further in the coming months, warned economists.


Tax cuts are also no guarantee in the fight against inflation, as new sales figures for the auto industry show.

Although the government in Ankara had cut taxes on some car groups, sales of passenger cars and light commercial vehicles fell for the fourth month in a row in October, by more than 40 percent year-on-year.

The recent devaluation of the Turkish lira is cited as one reason for this.

This has led many automakers to raise prices recently.

Production interruptions due to the chip crisis also played a role.