Istanbul bread price hike reflects Turkey's deepening inflation crisis

The Chamber of Commerce in Istanbul has decided to raise the maximum price of bread in the metropolis by over 30 per cent. Due to the rising cost of living, millions of Turks cannot make ends meet - writes the Turkish portal Duvar.

Following the Istanbul Chamber of Commerce's decision, the maximum price of approximately 200g of bread rose by 31.25 per cent to 10 lire (about 87p). As bread is commonly consumed, this is an indicator of the country's inflation.

The maximum price was increased due to the rising costs of ingredients such as flour and yeast, as well as labour and energy costs. It was also emphasized that companies "are facing serious difficulties in the face of rising costs."

In April, Turkey’s average annual inflation rate rose to 69.8 per cent - announced by the Turkish Statistical Institute on Friday. However, data from the independent inflation research group ENAG indicates that the annual rate has risen to 124.35 per cent.

On Thursday, the central bank announced an increase in the forecasted inflation rate at the end of the year by two percentage points to 38 per cent.

Due to the rising cost of living, millions of Turks are having difficulty making ends meet - evaluates the Duvar service.

Let's recall that Turkey has been struggling with chronic inflation for many years. Prices have been continuously rising at a double-digit pace since mid-2018. The country's central bank's aggressive cycle of interest rate hikes led to a slowdown in CPI growth between 2022 and 2023. However, the 69.8 per cent reading is still far from the central bank's official inflation target of 5 per cent annually.

The central bank's primary rate was raised in March to 50 per cent, and a statement from that month noted that "the restrictive monetary policy will be maintained until a significant and sustained decrease in the core monthly inflation is observed."

Economists note that maintaining such high interest rates negatively impacts Turkey's economic growth. The country's GDP is expected to grow by about 2.8 per cent this year after last year's expansion of about 5.6 per cent. This, in turn, increases political pressure on the central bank to loosen monetary policy. Turkish President Recep Tayyip Erdogan has long favoured lower rates, seeing them as a recipe for stimulating the economy.

However, it seems that the Central Bank of Turkey will not bow to politicians' requests and will prioritize combating inflation. The market consensus assumes that the main rate of the TCMB will remain at 50 per cent at least until the end of 2024. Given the scale of the economic imbalance facing the country by the Bosphorus, disinflation will be a process spread out over time, reports Reuters agency.