Inflation in Turkey jumps to 9.49% in July amid tax increases and a weaker lira

Official data showed on Thursday that inflation in Turkey jumped at the highest monthly pace in more than a year in July, due to various tax increases and the sharp depreciation of the lira.

Consumer prices rose 9.49 percent month-on-month in July, exceeding expectations in a Reuters poll of 9.1 percent and up sharply from 3.92 percent in June.

The Turkish Statistical Institute said annual consumer price inflation rose to 47.83 percent, after declining for eight months to 38.21 in June, amid factors including the lira’s relative stability until Erdogan’s re-election.

The lira has lost about 30 percent of its value so far this year – with a drop of more than 20 percent in June alone – after Erdogan signaled a shift towards more orthodox economic policies, including interest rate hikes.

Since then, the central bank raised the interest rate by 900 basis points to 17.5 percent in its two meetings, led by the bank’s new president, Hafiza Ghaya Arkan, but the pace of monetary tightening remained less than market expectations.