Turkey’s annual inflation soars to highest since 1998

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ISTANBUL — Turkey’s annual inflation rate jumped to a 24-year high of 73.5% in May, fueled by the war in Ukraine, rising energy prices and a tumbling lira — though the figure was slightly lower than economists had feared.

Inflation has surged since last autumn, when the lira slumped after the central bank launched a 500 basis-point easing cycle sought by President Tayyip Erdogan.

The latest figure surpassed the 73.2% touched in 2002 and is the highest since October 1998, when annual inflation was 76.6% and Turkey was battling to end a decade of chronically high inflation. Nevertheless, the consensus forecast was for annual inflation to rise to 76.55%.

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Month-on-month consumer prices rose 2.98%, the Turkish Statistical Institute said on Friday, compared to a Reuters poll forecast of 4.8%.

Transport and food costs have soared by 108% and 92% respectively over the last year, reflecting a deepening economic crisis for Turks struggling to afford basic goods.

The domestic producer price index climbed 8.76% month-on-month in May for an annual rise of 132.16%, reflecting how a 20% drop this year in the currency has sent import costs soaring.

SINGLE DIGIT?

The lira weakened 0.25% to 16.5050 against the dollar touching its weakest since December. The local currency tumbled 44% in 2021 and another 20% this year.

In April, the central bank forecast annual inflation would peak by June before declining to near 43% by year-end and single digits by end-2024.

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The government has previously said inflation will fall to single digits next year under its new economic program – prioritizing low interest rates to boost production and…