Currency weakens

Mega-inflation in Turkey rises to over 75 percent

The lira's exchange rate is close to record lows against the US dollar and the euro.(Bild: AFP)

Inflation has risen again in Turkey, reaching its highest rate since November 2022. The national currency, the lira, is also weakening, which is further fueling inflation in the country.

The country's central bank is fighting inflation with high key interest rates. However, at 50%, the most important central bank interest rate is still significantly lower than the inflation rate. The real key interest rate is therefore clearly negative, which is boosting economic activity - and therefore also inflation - rather than slowing it down.

Consumer prices rose by 75.45 percent in May compared to the same month last year, according to the statistics office in Ankara on Monday. This is the highest rate since November 2022. Analysts had expected an average inflation rate of 74.8 percent.

No improvementin sight
 The negative real interest rate is also considered a reason for the weak national currency, the lira, as it makes financial investments in Turkey less attractive for foreign investors. The exchange rate of the lira is close to record lows against the US dollar and the euro. The weak national currency makes imported goods and services more expensive and continues to fuel inflation.