Turkey: Annual Inflation Soars To 36% Amid Currency Crisis, Hits A 19-Year High

Turkey’s annual inflation rate soared to 36%, the highest since September 2002.

According to data released by the Turkish Statistical Institute, December saw the year’s biggest increase in inflation, with consumer prices up almost 14% compared to the previous month.

The producer price index rose 19.08% month-on-month in December aggregating to an annual rise of 79.89%, the data by the agency showed, reflecting a steep rise in import prices due to the currency crash.

Despite a plummeting currency and runaway inflation, the country's President Recep Tayyip Erdogan has pursued an unorthodox economic policy in his belief that high interest rates cause inflation instead of helping combating it. He continues to insist on slashing interest rates.

In conventional policy making, if facing a rising inflation then a country's central bank needs to increase interest rates to drive price increases down again. The higher the inflation, the higher rates need to go to combat it.

Erdogan has often sought to justify his decision quoting verses from the Koran which strictly forbids interest.

"I cannot stand by those who defend interest," he once said.

Inflation has been hovering 20% in recent months, driven by a lira plunge to record lows after the central bank continued to slash its policy rate

Under pressure from Erdogan, Turkey's central Bank has cut key interest rate by 5 percentage points — to 14% — since September.

Erdogan has previously fired a number of central bank governors who have not agreed with his unorthodox belief that high interest rates cause inflation instead of helping combating it.

Erdogan has also ignored plea from country's business community to return to the "rules of economic science".