Financial expert analyzes: Türkiye is struggling with rising inflation - causes and effects.

Financial expert analyzes: Türkiye is struggling with rising inflation - causes and effects.

According to a report by www.fr.de,

The inflation problem has become acute again in Turkey. The inflation rate is almost 65 percent and is expected to continue to rise. The areas of food, transport, health and education are particularly affected. This development is largely caused by the unexpectedly large increase in the minimum wage.

The inflation rate is expected to reach around 70 percent in the first half of 2024. The unusually frequent adjustments to the minimum wage, the weakness of the local currency, the lira, and the policies of Turkish President Recep Tayyip Erdogan have contributed to this development. In particular, Erdogan's long-term low interest rate policy has fueled inflation in Turkey. Only after his re-election last year did Erdogan move away from this policy and drastically increase key interest rates.

This development is expected to have a significant impact on the Turkish economy and financial sector. An inflation rate of 70 percent would lead to massive financial burdens for companies and consumers. The cost of living and consumer goods would rise sharply, which could lead to a reduction in purchasing power and economic uncertainty.

The Turkish central bank's monetary policy tightening will help stabilize inflation, but its full impact will only be felt after around 18 months. Until then, the Turks will have to cope with high consumer prices. Overall, inflation in Turkey is expected to pose major challenges to the economic and financial sectors.