According to official data released on Monday, Turkey‘s annual inflation surpassed 80% in August, further hurting customers already struggling with high energy, food, and housing costs. Consumer prices increased 80.21% from a year earlier, according to the Turkish Statistical Institute, up 0.6 percentage points over the previous month.
Inflation is substantially greater than government numbers, according to independent experts. The annual rate was 181% according to the Inflation Research Group.
Even though prices were on the rise, the lira was in freefall, and the current account was out of balance, the central bank surprisingly slashed interest rates to 13% in August. Between September and December of last year, the central bank drastically reduced interest rates by 5 percentage points. Until last month, the rate remained at 14%.
Inflation has been fueled by both Russia’s invasion of Ukraine and the weakening lira. Since the central bank started lowering interest rates, the Turkish lira has fallen more than 50% against the US dollar.
According to economists, President Recep Tayyip Erdogan’s unconventional belief that high borrowing costs cause higher prices—the antithesis of conventional economic theory—is what’s driving Turkey’s rising inflation rate.
The administration says it intends to decrease interest rates to promote output and exports in a drive to establish a current account surplus.