Turkey: Inflation in November rises significantly – Lira surprisingly calm

Inflation (consumer prices) in Turkey has been released this morning for the month of November. Year-on-year the inflation rate is now 10.56% after 8.55% in October! The previous month’s figure was the lowest level in 2019 and 2018. Now the U-turn? With “only” +8.72%, transport costs (energy prices) are rising almost the weakest compared to most other categories. But food prices are also rising by only 8.89%. Alcohol and tobacco prices rise by 43.3%. Hotel nights and health costs both show an inflation rate of over 13%. Is it now retaliating with a delay of several months that the Turkish central bank has loosened its monetary policy too much? With its three large interest rate steps in a short period of time (key interest rate cut from 24% to 14%). The Turkish Lira does not react at all this morning and remains at a rate of 5.74 Lira for 1 US-Dollar. Will it weaken in the course of the day?

Turkey’s GDP growing again

Only yesterday the economic performance of Turkey for the 3rd quarter was published. Year-on-year it rose by 0.9%. In the previous three quarters there were significant setbacks with -1.6%, -2.3% and -2.8% respectively. This current ray of hope actually speaks for the Turkish economy. Overindebtedness among consumers, for example, is a huge problem. And in a long-term comparison, the Turkish Lira is trading at an extremely low level against the Euro and the US Dollar. As a result, imported goods are very expensive.

And also a week ago, President Erdogan called on the Turks to exchange currencies patriotically. They should therefore exchange their Dollar and Euro stocks into Turkish Lira, as an act of patriotism. So far this appeal has not helped. A week ago USDTRY stood at 5.75, now at 5.74.

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