Russia-Ukraine crisis causes Turkish inflation to hit fresh record of 61.1 per cent

Turkey'sinflationhas soared to a newrecord, official data showed Monday, as analysts see an impact from Russia's invasion of Ukraine and President Recep Tayyip Erdogan's unorthodox interest rate policy.

Exacerbating a cost of living crisis, consumer prices accelerated to 61.14per centat an annual rate, up from 54.4per centin February, according to the statistics agency.

The weakening lira and runawayinflationhave become major sources of public discontent in Turkey as President Recep Tayyip Erdogan faces an election next year.

Turkey has recorded double digitinflationsince early 2017 but the latest figure is the highest since the ruling Justice and Development Party (AKP) came to power in 2002.

The currency was stable following the latestinflationdata, trading at 14.7 lira against the dollar and 16.2 lira against euro.

The war in Turkey's Black Sea neighbourhood has had a major impact on the country as Russia is a key supplier of energy while Ukraine ships wheat.Turkishtourism industry also mainly relies on Russian tourists.

On Friday, S&P global rating agency kept a negative outlook on Turkey and cut its credit rating.

"The fallout of the Russia-Ukraine military conflict, including rising food and energy prices, will further weaken Turkey's already tenuous balance of payments and exacerbateinflation," it said.

The biggestprice increases in March were in transportation and food prices, according to the statistics agency.

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'Be patient'

While countries around the world are facing risinginflationas energy prices have soared while economies emerge Covid restrictions, Turkey's problems have also been affected by Erdogan's unorthodox economic approach.

TheTurkishleader rejects the idea thatinflationshould be fought by hiking the main interest rate, which he believes causes prices to grow even higher -- the exact opposite of conventional economic thinking.

Turkishcentral bank "policies are just not working in counteringinflation," said Timothy Ash, emerging markets strategist at BlueBay Asset Management.

"Indeed, I think the overwhelming consensus is that the unorthodox policy settings of the CBRT (central bank) are a major cause ofinflation," he said in a note to clients.

"The war in Ukraine is just making things that much worse."

On Saturday, Erdogan said the increase in food and energy prices triggered by the war in Ukraine "is affecting us too."

"We are fighting against those who are charging unreasonably high prices," he said.

"There are problems we need to address ... I ask you to be patient and trust us," in reference to people squeezed by the bitinginflation.

In January, Erdogan changed the head of the state statistics agency.

Turkishmedia reported that he was unhappy with theinflationfigures it published while the opposition believes that the official figures grossly underestimate the reality.

Jason Tuvey, senior emerging markets economist at the London-based Capital Economics, saidinflationwas likely to rise further over the coming months and stay close to the current high rates for much of this year.

"But there is still little sign that the central bank and, crucially, President Erdogan are about to shift tack and hike interest rates," he said.