Inflation in Turkey passed the 80 percent mark in August. According to figures from the Turkish statistical office on Monday, consumer prices were 80.21 percent higher than a year earlier.
That is the highest level since 1998. In July, inflation was 79.6 percent.
Inflation in Turkey is driven by several factors. Much of the explanation lies in the weakening of the currency, the lira. It has lost more than half its value against the US dollar in a year. In addition, price increases in energy and raw materials also play a role, as elsewhere in Europe, after the Russian invasion of Ukraine.
Despite sky-high inflation, the Turkish economy grew strongly in the second quarter. Gross domestic product (GDP) rose by 7.6 percent year-on-year.
Unlike many other central banks, the Turkish central bank is not responding to high inflation with interest rate hikes but rather with interest rate cuts. For example, August’s main interest rate was lowered from 14 to 13 percent. This is happening under pressure from President Recep Tayyip Erdogan. Contrary to the prevailing theory among economists, he believes that higher interest rates lead to higher prices.
Inflation in Turkey has been almost uninterrupted in double digits since early 2017.