Fiat Fears Intensify as Turkey's Inflation Runs Wild; Citizens Turn to Bitcoin, Tether
The Turkish lira took another battering last month, with January inflation hitting a whopping 48.7% – leading some crypto advocates to point the finger at the ultimate failure of central banks’ monetary policies.
The Turkish government, led by President Recep Tayyip Erdogan, has resolutely stuck to its guns on a much-derided policy that involves slashing – rather than raising – interest rates. And the latest financial numbers, released by the Turkish Statistical Institute and reported by media outlets such as CNBC and the Financial Times, make grim reading.
Erdogan has claimed that inflation, which plagued Turkey last year, was temporary and argued that skyrocketing living costs would soon be abated by rate-cutting measures.
But data compiled by the Turkish Statistical Institute indicated that not only has inflation hit a new 20-year high, but that the prices of consumer goods leaped up 11.1% last month. The figure outstripped analysts’ predictions, which ranged between 9% and 10%.
Last year was a torrid one for Turkish savers. They saw the lira lose 44% of its value in 2021.
“What happens next will shed light on the government's unconventional interest-rate approach,” mused the economist Mohamed El-Erian, the President of Queens’ College at Cambridge University,on Twitter. He asked: “Will goods availability increase or inflationary expectations worsen?”
The answer, from many respondents, was clear: crypto.
Some are convinced that the picture is actually a lot bleaker: The Economist’s Turkey correspondent wrote that the “vast majority of Turks are convinced actual inflation is much higher,” noting that “replacing the head of the statistics agency, as Erdogan did days ago, hardly inspires confidence.”
The Turkish Inflation
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