Turkey’s inflation rate, which hit more than 50 percent in February, may accelerate further this year due to deteriorating price expectations and the surging cost of food, energy and other key commodities, said Servet Yıldırım, a columnist for the Dünya newspaper.
Perhaps more importantly, the central bank is powerless to intervene with interest rate hikes to reverse the uptick in inflation, which reached 54.4 percent last month, due to the government’s monetary policy experiment that states lower interest rates bring slower inflation, Yıldırım said on Tuesday. The central bank cut its benchmark rate to 14 percent from 19 percent in the final four months of last year, responding to government orders.
“The central bank has its hands tied politically; it does not touch the policy rate. However, the reaction of inflation-targeting central banks in the face of high inflation like ours would be to increase interest rates and tighten monetary policy,” he said.
“In the words of worried economists, we took the paste out of the tube, but now we can’t put it back in,” Yıldırım said. “We would like to say “these figures are the peak, inflation comes back from here”, but the figures and developments say that it may not be so.”
Yıldırım also pointed to global supply issues and geopolitical shocks, which were hurting the inflation outlook. Turkey’s risk premium and external borrowing costs are also increasing, he said.
Ahval