Saturday, June 28, 2008

Souring Economy Does Not Bode Well for AKP

Bad news for the ruling party (esp. in the southeast) . . .

From Today's Zaman:
Increasing energy and food prices worldwide and drought conditions at home have started to impact the living expenses of households in Turkey.

With the prices of food staples rising in local markets and grocery stores, Turkish families are being forced to foot ever-increasing food bills. What is troublesome to many, however, is that personal income has not risen in parallel to offset the high cost of living in Turkey.

According to trade groups, the prices of basic food and consumer goods have shot up 45 percent compared to last year, more than the official inflation figures released by government agencies.

The Turkish Statistics Institute (TurkStat) has revealed that the consumer price index (CPI) for May returned to double-digit figures, hitting 10.74 percent for the first time since April 2007. Analysts say the higher global commodity prices are driving inflation in Turkey, which imports 95 percent of its natural gas and oil.

The Central Bank of Turkey, which raised the benchmark interest rate twice in the last two months, is trying to curb inflation by increasing interest rates. In a written statement last week, the central bank said it is ready to continue raising rates in a "measured" way to counter the risk of rising inflation caused by high oil and food prices. Central Bank of Turkey Governor Durmuş Yılmaz explained on Wednesday that the bank would take the necessary measures if inflation rises above new inflation targets. Earlier this month the bank nearly doubled its inflation consumer price inflation target to 7.5 percent from 4 percent.

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