Official data released today, Thursday, shows that "inflation in Turkey surged at the highest monthly rate in over a year in July, driven by various tax increases and the sharp decline in the value of the lira." Consumer prices rose by 9.49 percent month-on-month in July, surpassing expectations from a Reuters poll of 9.1 percent and sharply rising from 3.92 percent in June. The Turkish Statistical Institute reported that "annual consumer price inflation increased to 47.83 percent, after declining for eight months to 38.21 percent in June, amid factors including a relatively stable lira until Erdoğan's re-election."
The lira has lost nearly 30 percent of its value so far this year—falling more than 20 percent in June alone—after Erdoğan indicated a shift towards more traditional economic policies, including raising interest rates. Since then, the central bank has raised the interest rate by 900 basis points to 17.5 percent under the leadership of the new bank president, Hafize Gaye Erkan, although the pace of monetary tightening remains below market expectations.
Sector-wise, annual inflation was driven by the hospitality, café, and restaurant sector, which recorded a price jump of 82.6 percent. Health sector prices rose nearly 76 percent, and the food and non-alcoholic beverages sector, which has a significant impact, increased by 60.7 percent. The increase in inflation was anticipated after Ankara raised several taxes, including value-added tax, corporate tax, and special consumption tax on fuel. Additionally, the cumulative decline in the value of the lira contributed to rising prices. The lira slightly dropped to 26.9870 against the dollar after the data was published, just shy of its record low of 27.05 against the dollar.
