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Turkish inflation data expected to outline case for increasing interest rates

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Turkish inflation data expected to outline case for increasing interest rates

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Photo: Reuters

Turkey’s central bank is expected to release January’s inflation data today.

Inflation stood at 20.3% in December, and economic analysts are predicting a slight decrease to 20.1% for January.

Turkey has been one of the fastest-growing economies in the world, outperforming both China and India in 2017 and reporting a very high growth rate of 7.22% in the second quarter of 2018. However, this economic expansion has largely been fuelled by foreign-currency debt, resulting in the present inflation crisis.

Raising interest rates could have helped to curb the massive increase in consumer prices, but Turkish President Recep Erdogan has used his influence over the national bank to keep interest rates lower than they need to be to effectively combat inflation–currently at about 24%– to promote growth.

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If President Erdogan continues to skirt Turkey’s inflation problem, the country could face political unrest from excessively high prices—possibly increasing the extent of anticipated AKP losses in local elections scheduled for March. Such potential political unrest jeopardises President Erdogan’s ambitious economic vision for Turkey as a regional economic powerhouse.

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