Turkey’s inflation is still rising. According to the Turkish Statistical Institute, the country’s CPI index rose 69.8 percent in April. The monthly inflation in April was also 3.18 percent. Core Inflation (this graph) which excludes the food and energy items is at the highest rate in more than two decades. The central bank lending interest rate for short repo contracts is close to 50 percent annually. Yet, the Turkish economy has not shown a meaningful decrease in the price pressure. With these inflation figures the interest rates should remain high until the end of 2024.
Yet many analysts believe that the inflation would finally enter a down trend. It is just a matter of time before it starts to decline. However, the low inflation era created by reformist Kemal Dervis seems to be over. The fiscal dominance led by aggressive government spending and budget deficit is making the monetary policy and interest rate unable to control the price trends.For a one digit inflation rate, the country needs a strong reform program which includes austerity in the government spending. However, such policies are unlikely to happen in the current administration of the country.
