Pri­vate sec­tor agrees to 10% price cuts as bat­tle with in­fla­tion con­tin­ues

Cyprus Today - - TURKEY -

TURKEY’S pri­vate sec­tor has agreed to cut prices on the goods it sells by at least 10 per cent across the board, Fi­nance Min­is­ter Berat Al­bayrak said on Tues­day, as he called on busi­nesses to join a na­tional strug­gle to tamp down run­away in­fla­tion.

Fi­nan­cial mar­kets gave a luke­warm ap­praisal to the pro­gramme, which in­cludes a freeze in en­ergy prices. Mr Al­bayrak, Pres­i­dent Re­cep Tayyip Er­doğan’s son-in-law, has promised a “fully fledged fight” against in­fla­tion but in­vestors say de­liv­er­ing that would re­quire ag­gres­sive in­ter­est rate hikes and a more ortho­dox ap­proach to mone­tary pol­icy.

The lira has fallen some 40 per cent this year, driv­ing up the price of ev­ery­thing from food to fuel and send­ing in­fla­tion to 25 per cent last month, its high­est in 15 years.

The sell-off has been sparked by con­cern about Mr Er­doğan’s in­flu­ence over mone­tary pol­icy. A self­de­scribed “en­emy of in­ter­est rates”, the pres­i­dent wants bor­row­ing costs low­ered.

“It is not suf­fi­cient to cope with in­fla­tion,” said Kaan Na­zli, a se­nior econ­o­mist at as­set man­ager Neu­berger Ber­man.

“What you re­ally need to do is to en­gi­neer a con­tin­u­ous slow­down in the econ­omy, keep mone­tary pol­icy tight and do things that way.”

The vol­un­tary dis­count would be re­flected in all the goods that make up the in­fla­tion bas­ket, and prices would be low­ered by a min­i­mum 10 per cent un­til the end of the year, Mr Al­bayrak said.

Banks will also of­fer 10 per cent dis­counts on their high­est in­ter­est rates, he said.

It was not im­me­di­ately clear how many goods would ul­ti­mately be im­pacted, or how many com­pa­nies would take part but Mr Al­bayrak called on the pub­lic to sup­port those that did push through the price cuts.

For years, volatile food prices have vexed pol­i­cy­mak­ers’ at­tempts to rein in in­fla­tion. Ankara’s in­abil­ity to cool the rise has fu­elled a blame game among food pro­duc­ers and re­tail­ers, with each ac­cus­ing the other of hik­ing prices.

In­dus­try of­fi­cials and economists say there are deeper struc­tural prob­lems, from the lack of a long-term agri­cul­tural pol­icy to a sup­ply chain hin­dered by mid­dle­men and ar­cane bu­reau­cracy.

In Septem­ber, the cost of food and non-al­co­holic drinks rose more than 6 per cent from a month ear­lier, heap­ing more pres­sure on con­sumers.

Mr Er­doğan has called on Turks to re­port un­usual price hikes in shops, say­ing it was the gov­ern­ment’s re­spon­si­bil­ity to raid the in­ven­to­ries of stores if nec­es­sary.

The trade min­istry said on Mon­day it had asked more than 100 com­pa­nies to ex­plain what it says were ex­ces­sive price in­creases of goods, in a probe into sus­pected price goug­ing af­ter it in­spected more than 69,000 prod­ucts at nearly 4,000 com­pa­nies.

As the cur­rency cri­sis deep­ened in Au­gust, the gov­ern­ment made it il­le­gal for com­pa­nies to ar­bi­trar­ily im­pose price in­creases if they were not im­pacted by a rise in in­put costs or the ex­change rate.

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