Turkish Inflation Continues To Grow – Worst Performer Amongst Emerging Market Against The USD

Inflation, as for across the world, has surged past 73% making it the fastest inflation growth witnessed by Turkey since 1998.

President Erdogan deployed ultra-loose monetary policy during covid times. He subscribes to the theory that higher rates lead to higher inflation, not lower. It would be important to not forget that Turkey is an export-led growth country, they rely on exports. One way to increase exports is to have a depreciated currency. So it may be no surprise for some that President Erdogan would subscribe to this.

With 500 basis points of QE, the central bank still refrains from raising rates. Rather, they believe that by promoting policies that widen the use of local currency, and by increasing the accessibility of long-term investment loans, the country can triumph.

Food and Energy were the biggest drivers of higher prices for Turkey. Though, this does not excuse double-digit rates of inflation. Erdogan will have to realise at some point, that tightening needs to occur. It may just be a profitable trade to long put options on the Lira, I would not anticipate Turkey’s economic situation to get any better (not financial advice).

Join the conversation!

We have no tolerance for comments containing violence, racism, profanity, vulgarity, doxing, or discourteous behavior. If a comment is spam, instead of replying to it please hover over that comment, click the ∨ icon, and mark it as spam. Thank you for partnering with us to maintain fruitful conversation.