With maverick policies, Turkey cannot hope to bring down prices

Stabilising the lira will not be enough to stave off inflation


  • by ISTANBUL
  • 02 25, 2022
  • in Finance and economics

AT LEAST BY comparison with last year’s disaster, when it crashed by 44% against the dollar, Turkey’s lira has had a good run of late. Since January the currency has lost only 4% of its dollar value. Part of the reason is a scheme to protect lira deposits against swings in the exchange rate, which the government introduced in December, and which has suppressed demand for hard currency. Another factor is a series of interventions in currency markets by Turkey’s central bank. The latest of these came on February 22nd, when the bank reportedly sold about $1bn in foreign reserves, helping the currency absorb some of the shock waves from the run-up to Russia’s invasion of Ukraine.The lira may have recovered its footing. But the spike in inflation set off by the currency’s collapse last year is here to stay. The officially reported inflation rate rocketed to a ghastly 48.7% year-on-year in January. Forecasts see the rate peaking in the spring, and finishing the year well above 30%, thanks largely to base effects. Surging energy prices, as well as widespread fears that the government has been massaging the inflation data, have sparked protests in parts of the country. The leader of Turkey’s main opposition party has announced he will not pay his electricity bills unless President Recep Tayyip Erdogan’s government reverses recent price rises.

  • Source With maverick policies, Turkey cannot hope to bring down prices
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