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Latest Turkish inflation surge could be persistent

Wednesday, June 7, 2017

Subject

The recent surge in inflation.

Significance

Annual consumer price inflation (CPI) declined slightly to 11.72% in May from an 8.5-year high of 11.87% in April. Inflation has fluctuated between 4 and 12% for over a decade, averaging just over 8%. A surge in recent months has provoked renewed public debate and led the government to propose new measures to restrain food prices.

Impacts

  • Banks, companies and households will have to live with the uncertainties and risks associated with high and volatile inflation.
  • Risk perceptions will complicate efforts to raise domestic savings, reduce dollarisation, keep down credit costs and encourage investment.
  • Reaching agreement on wage and pensions increases may become more difficult, with higher inflation hurting the government’s popularity.
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