Is Turkey on the brink of hyperinflation?
Turkey has thrown caution to the wind as the rest of the world frets about surging inflation. The country’s central bank cut its main interest rate for the third consecutive month to 15 per cent in November, despite the nation’s consumer price index rising 19.9 per cent year on year in October.
On Friday, annual inflation is expected to cross the 20 per cent threshold to hit 20.7 per cent, according to a Reuters poll. That would represent its highest rate since November 2018, when the country was reeling from a currency crisis.
Turks have been watching with horror while enduring a repeat of that episode in recent weeks, with the lira tumbling 28 per cent against the dollar since the start of November. Analysts warn that, if President Recep Tayyip Erdogan refuses to abandon his fixation with low interest rates, Turkey could be headed towards hyperinflation. The country is heavily reliant on imports and other raw materials that are becoming increasingly expensive as the lira slides.