Turkey’s official inflation rate barely changed on Monday in a sign that a year-long crisis that has seen prices soar by 80 percent may finally be starting to ease.
The TUIK state statistics agency said that consumer prices rose by 80.2 percent in August from a year earlier.
The figure was fractionally higher than the 79.6 percent reported in July and only a small bump up from the 78.6 percent reading in June.
Turkey’s prices have been steadily rising since a low of 16.6 percent in May 2021.
The strategically important developing nation lurched into its latest economic crisis when President Recep Tayyip Erdogan launched an unorthodox experiment that attempted to fight inflation by lowering the main interest rate.
Conventional economic theory embraced by almost every other big nation pursues the exact opposite approach.
But Erdogan argues that higher interest rates contribute to price increases by making borrowing more expensive for businesses.
The president also says that charging interest violates Islamic rules against usury.
The central bank said over the weekend it expects the inflation rate to fall to 65 percent by the end of the year.
Erdogan himself says prices will only start falling in January.
The crisis has seen the ruling party’s approval ratings drop to historic lows heading into the next general election due by June 2023.
The increases were led by a 117-percent jump in the cost of transportation and a rise of more than 90 percent in the price of food and household goods.
Erdogan’s government attributes inflation to outside factors such as the global spike in food and energy prices caused by Russia’s invasion of Ukraine.
But analysts blame Erdogan’s own government for pushing ahead with policies that have devalued the lira by more than 50 percent in 12 months.
That has made energy imports even more expensive and forced Turkey to strike deals with former regional rivals in a bid to prop up its depleting hard currency reserves.
It has also prompted Turks to buy even more dollars in a bid to preserve their eroding saving — a vicious circle that analysts warn can only be broken with sharp interest rate hikes.
None appears to be in the offing.
The central bank stunned the markets by actually lowering its main interest rate to 13 percent from 14 percent last month.
Erdogan has redoubled down on his economic rhetoric heading into election season and analysts fear that the policy rate is more likely to go down than up in the coming months.
“It seems that further interest rate cuts are more likely than not later this year,” Capital Economic said in a research note issued after the inflation report.
Some analysts and opposition leaders also question the accuracy of Turkey’s official economic readings.
Istanbul last week reported a 100-percent annual jump in prices.
Economists say the difference in inflation reported by Turkey’s largest city and the national figure — now at 20 percentage points — has never been higher.
They also point out that Erdogan has stacked most state institutions with allies while Istanbul is led by an opposition party mayor.
“I no longer believe the official (inflation) series,” said emerging market economic Timothy Ash of BlueBay Asset Management in London.
“It looks like fantasy, wishful thinking.”