Connect with us

Economics

Turkey’s inflation climbs to 68.5% despite continued rate hikes

Published

on

A money changer holds Turkish lira and U.S. dollar banknotes at a currency exchange office in Ankara, Turkey December 16, 2021.

Cagla Gurdogan | Reuters

Turkey’s annual inflation rose to 68.5% for the month of March, an increase on February’s 67.1% inflation read, according to the Turkish Statistical Institute’s report released Wednesday.

The monthly rise in consumer prices came out at 3.16%, led by education, communication, and hotels, restaurants and cafes, which saw month-on-month rises of 13%, 5.6%, and 3.9%, respectively.

On an annual basis, education again saw the highest cost inflation at 104% year on year, followed by hotels, restaurants and cafes at 95% and health at 80%.

Turkey has launched a concerted effort to tackle soaring inflation with interest rate hikes, most recently raising the country’s key rate from 45% to 50% in late March.

Turkey central bank leadership change came from former governor's 'personal shortcomings': Columnist

Much of the inflation in recent months stems from a significant increase to the minimum wage that Turkey’s government mandated for 2024. The minimum wage for the year rose to 17,002 Turkish lira (around $530) per month in January, a 100% hike from the same period a year prior.

Economists expect further rate increases from the central bank will be necessary.

While the March inflation count represents “the smallest monthly increase in three months and suggests that the impact of the large minimum wage hike in January may now have largely passed, it is still far from consistent with the single-digit inflation that policymakers are trying to achieve,” Nicholas Farr, an emerging Europe economist at London-based Capital Economics, wrote in an analyst note Wednesday.

“The latest inflation figures do little to change our view that further monetary tightening lies in store and that a more concerted effort to tighten fiscal policy will be needed too,” he said.

Turkey’s central bank implemented eight consecutive interest rate hikes from June 2023 to January 2024, totaling a cumulative 3,650 basis points. It paused in February, suggesting the tightening cycle was over, before raising rates again in March, citing “deterioration in the inflation outlook” and saying that “tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed.”

Supporters of Istanbul Mayor Ekrem Imamoglu, mayoral candidate of the main opposition Republican People’s Party (CHP), celebrate following the early results in front of the Istanbul Metropolitan Municipality (IBB) in Istanbul, Turkey March 31, 2024. 

Umit Bektas | Reuters

Analysts note that with Turkey’s local elections, which took place on March 31, out of the way, pushing ahead with tighter monetary policy will likely be easier. The vote for municipal leaders across the country, which took place Sunday, saw Turkey’s opposition party deal a historic blow to Turkish President Recep Tayyip Erdogan’s ruling AK Party, winning the country’s five largest cities and several rural areas as well.

Economic pain and steep living cost increases for ordinary Turks over the last several years played a major role in the results, political observers said.

Exercising tight control over the central bank, Erdogan for the last few years refused to raise rates, calling them “the mother of all evil” and insisting, against economic orthodoxy, that lowering rates was the way to cool inflation. This was despite declining foreign currency reserves and a rapidly weakening Turkish lira, which has lost some 82% of its value against the dollar in the last five years.

Only after appointing a new finance and central bank team in May 2023 did the central bank stage a turnaround in policy, suggesting greater independence at the bank from the executive branch of Turkey’s government. But the political loss for Erdogan’s party in the March local elections could make his future moves more unpredictable, some analysts say.

“The outcome of the vote fuels political uncertainty and raises doubts about whether President Recep Erdogan will stick to unpopular orthodox policies,” Bartosz Sawicki, a market analyst at fintech firm Conotoxia, wrote in a note. But, he added, “With no elections until 2028, another overhaul leading to the return of extra-loose monetary policy seems unlikely.”

Economics

Andrew Bailey on why UK-U.S. trade deal won’t end uncertainty

Published

on

Bank of England Governor Andrew Bailey attends the central bank’s Monetary Policy Report press conference at the Bank of England, in the City of London, on May 8, 2025.

Carlos Jasso | Afp | Getty Images

Bank of England Governor Andrew Bailey told CNBC on Thursday that the U.K. was heading for more economic uncertainty, despite the country being the first to strike a trade agreement with the U.S. under President Donald Trump’s controversial tariff regime.

“The tariff and trade situation has injected more uncertainty into the situation… There’s more uncertainty now than there was in the past,” Bailey told CNBC in an interview.

“A U.K.-U.S. trade agreement is very welcome in that sense, very welcome. But the U.K. is a very open economy,” he continued.

That means that the impact from tariffs on the U.K. economy comes not just from its own trade relationship with Washington, but also from those of the U.S. and the rest of the world, he said.

“I hope that what we’re seeing on the U.K.-U.S. trade side will be the first of many, and it will be repeated by a whole series of trade agreements, but we have to see that happen of course, and where it actually ends up.”

“Because, of course, we are looking at tariff levels that are probably higher than they were beforehand.”

Trump unveils United Kingdom trade deal, first since ‘reciprocal’ tariff pause

In Bank of England’s Monetary Policy Report released Thursday, the word “uncertainty” was used 41 times across its 97 pages, up from 36 times in February, according to a CNBC tally.

The U.K. central bank cut interest rates by a quarter percentage point on Thursday, taking its key rate to 4.25%. The decision was highly divided among the seven members of its Monetary Policy Committee, with five voting for the 25 basis point cut, two voting to hold rates and two voting to reduce by a larger 50 basis points.

Bailey said that while some analysts had perceived the rate decision as more hawkish than expected — in other words, leaning toward holding rates elevated than slashing them rapidly — he was not surprised by the close vote.

“What it reflects is that there are two sides, there are risks on both sides here,” he told CNBC.

“We could get a much more severe weakness of demand than we were expecting, that could then pass through to a weaker outlook for inflation than we were expecting.”

“There’s a risk on the other side that we could get some combination of more persistence in the inflation effects that are gradually working their way through the system,” such as in wages and energy, while “supply capacity in the economy is weaker,” he said.

Continue Reading

Economics

Trump knocks down a controversial pillar of civil-rights law

Published

on

IN THE DELUGE of 145 executive orders issued by President Donald Trump (on subjects as disparate as “Restoring American Seafood Competitiveness” and “Maintaining Acceptable Water Pressure in Showerheads”) it can be difficult to discern which are truly consequential. But one of them, signed on April 23rd under the bland headline “Restoring Equality of Opportunity and Meritocracy”, aims to remake civil-rights law. Those primed to distrust Mr Trump on such matters may be surprised to learn that the president’s target is not just important but also well-chosen.

Continue Reading

Economics

Harvard has more problems than Donald Trump

Published

on

A Programme at Harvard Divinity School aspired to “deZionize Jewish consciousness”. During “privilege trainings”, working-class Harvard students were instructed that, by being Jewish, they were oppressing wealthier, better prepared classmates. A course in Harvard’s graduate school of public health, “The Settler Colonial Determinants of Health”, sought to “interrogate the relationships between settler colonialism, Zionism, antisemitism, and other forms of racism”: Will these findings by Harvard’s task-force on antisemitism and anti-Israel bias, released on April 29th, shock anyone? Maybe not. Americans may be numb by now to bulletins about the excesses, not to say inanities, of some leftist academics.

Continue Reading

Trending