Aurelia Butler

Turkish inflation has reached its highest level since Recep Tayyip Erdogan came to power almost two decades ago as the president’s contentious economic management sparks a surge in prices.The country’s consumer price index rose 36 per cent year on year in December, according to data released by Turkey’s statistical agency on Monday.It marks the highest level of consumer price rises since September 2002, when Turkey was reeling from a financial crisis that paved the way for a landslide election victory for Erdogan’s Justice and Development party (AKP) in November that same year.The figure, a sharp increase from the previous month’s official inflation rate of 21 per cent, comes after president Erdogan ordered the central bank to repeatedly slash interest rates in recent months despite double-digit inflation. His insistence that the bank lower its benchmark lending rate by a total of 5 percentage points since September, to 14 per cent, has led to deeply negative real interest rates, causing investors to flee from the Turkish lira and stoking inflation in a country that is highly reliant on imported energy and goods.That in turn has prompted mounting public discontent about the soaring cost of living, and has led to an erosion of support for the AKP in opinion polls. December’s inflation rate, which was higher than the consensus estimate among analysts of 30 per cent, was driven by hefty increases in the cost of transport, which rose almost 54 per cent year on year, and food and drink, which rose close to 44 per cent. In a sign of the pain being inflicting on business by the plunge in the lira, which lost about 45 per cent of its value against the dollar in 2021, the producer price index rose significantly faster at a rate of 80 per cent year on year.Ibrahim Aksoy, an analyst at HSBC in Istanbul, warned that inflation was likely to rise further in the months ahead, predicting it would reach about 42 per cent in April and May. The figures were met with dismay from the country’s opposition parties. Durmus Yilmaz, a former central bank governor who now serves as a senior official in the IYI party, said inflation was “the root cause” of the country’s economic problems and called for “an urgent stabilisation programme”.

Ali Babacan, a former Erdogan ally who now leads the opposition Deva party, suggested the true inflation rate was even higher than the official figures, describing the country’s statistical agency as “the institute for fiddling the numbers”. He said the rate “doesn’t even come close to” the huge energy price rises announced at the start of this year, which saw electricity prices raised by as much as 125 per cent for the most intensive commercial users and by about 50 per cent for households. Erdogan, a longstanding opponent of high interest rates, rejects the conventional economic wisdom that raising the cost of borrowing helps to curb high inflation.The Turkish president has continued to insist, despite mounting dismay from Turkey’s business community, that lower rates will ultimately help bring price stability as part of what he says is a new economic model that aims to boost exports, investment and job creation.Erdogan has acknowledged the pain inflicted by inflation on the public, vowing last month that his government would not allow workers to be “crushed” by price rises as he announced a 50 per cent rise in the minimum wage in lira terms.Economists warned that, while a pay rise for the lowest paid workers was necessary to protect them from rising living costs, such a large increase would itself be inflationary and price rises risked running out of control. More

LONDON (Reuters) – World stock markets got 2022 off to a confident start on Monday after their third consecutive year of double-digit gains, while the dollar, oil prices and benchmark government bond yields all made early moves higher.London’s traders were enjoying their final day of festive rest, but mainland Europe saw a lively start, with the STOXX 600 index notching up a quick record high after a flurry of encouraging data from the euro zone and eastern Europe. The euro zone’s Manufacturing Purchasing Managers’ Index (PMI) dipped to 58.0 in December from November’s 58.4, but it matched an initial “flash” estimate despite a recent surge in coronavirus infections and was still comfortably above the 50 mark separating growth from contraction.”We’re seeing some tentative but very welcome signs that the supply chain crisis which has plagued production lines all across Europe is beginning to recede,” said Joe Hayes, a senior economist at IHS Markit that compiles the PMI survey.The data also showed firms’ stocks of purchases rising at a survey-record rate in December. That meant the input prices index sank to an high eight-month low, even though it remains relatively high, allowing factories to raise their prices at a much slower pace. “Easing inflation rates are again a welcome sign, but we’re still in hot territory,” Hayes added.As trading settled, bourses in Germany, France, Italy and Spain rose between 0.8% and 1.1%, and 10-year German government bond yields – the benchmark for European borrowing costs – were up 4 basis points at their highest level since November. [/FRX] The prospect of higher rates lifted euro zone bank stocks 1.2% while carmakers were up 1.8% after both Tesla (NASDAQ:TSLA) and Hyundai had issued bullish targets for this year. LIRA In the currency markets, the euro zone data failed to lift the euro as focus remained on how much further the dollar could rise if the Federal Reserve hikes U.S. interest rates a number of times this year, as is currently expected.Turkey’s lira saw a bumpy start to the year, diving as much as 5% before a partial recovery, as its central bank revealed it had used up more than $3 billion of its reserves last month when the currency slumped to record lows. Turkey’s statistics agency also reported that annual inflation jumped far more than expected to 36% year-on-year in December, the highest since September 2002.”This reflects a vicious cycle of demand-pull inflation, which is very dangerous because the central bank had implied the price pressure was from supply constraints, and that it couldn’t do anything about it,” said Ozlem Derici Sengul, founding partner at Spinn Consulting in Istanbul.The commodity markets were quickly back in the swing of things after a stellar last 18-20 months for most of them.Oil rose towards $79 a barrel on Monday, supported by tight supply and hopes of further demand recovery in 2022 spurred in part by a view that the Omicron coronavirus variant is unlikely to shut down the global economy again. [O/R]OPEC and its allies, known as OPEC+, are expected to stick to a plan to raise output gradually at a meeting on Tuesday.Brent crude, which leapt 50% last year and is up 80% from the COVID-triggered lows of 2020, rose $1 cents, or 1.3%, to $78.86 a barrel. U.S. West Texas Intermediate (WTI) crude added $1.03 or 1.4%, to $76.24.”Infection rates are on the rise globally, restrictions are being introduced in several countries, the air travel sector, amongst others, is suffering, yet investors’ optimism is tangible,” said Tamas Varga of oil broker PVM. More

The US and its allies will “respond decisively” if Russia invades Ukraine, President Joe Biden told his counterpart in Kyiv as tensions mounted over Moscow’s troop deployments.The call between Biden and Ukraine’s president Volodymyr Zelensky yesterday was the latest diplomatic attempt to allay mounting tensions after Russia amassed about 100,000 soldiers on Ukraine’s eastern frontier. Washington, Moscow and Nato member states are set to meet for talks this month, when Russia intends to press for “security guarantees” to limit the military alliance’s expansion in Europe.Biden “reaffirmed” America’s commitment to Ukraine’s “sovereignty and territorial integrity”, while after the exchange, Zelensky wrote on Twitter that the leaders had discussed “joint actions” by Ukraine, the US and partners “in keeping peace in Europe, preventing further escalation, reforms, de-oligarchisation”.Five more stories in the news1. Tesla dodges supply woes to deliver record number of vehicles Tesla smashed its own production and delivery records in the final months of last year, shrugging off supply chain and other problems to hand customers the keys to more than 308,000 vehicles. Now Wall Street is forecasting another leap in sales to come.2. Finland insists on right to join Nato Russia’s sabre-rattling in Ukraine has reignited the debate as to whether Finland should join Nato, defying Moscow’s demands that the military alliance limit its expansion in Europe.3. Twitter bans Republican lawmaker over misinformation Marjorie Taylor Greene, the Republican whose provocative social media posts have made her one of the most controversial members of the US Congress, has been permanently barred from Twitter after repeatedly posting misinformation about the pandemic.4. Sudan’s prime minister resigns Two month after he was reinstated in the post, Abdalla Hamdok has resigned, saying a new round of talks with the military was needed on a stalled transition to democracy.5. South Korean chip companies step up US lobbying efforts Samsung, Hyundai, SK Group and LG are ramping up their lobbying presence in Washington to navigate US-China tensions and win critical export licences to supply Chinese companies targeted by trade sanctions. The South Korean chipmakers are leading the efforts as they bow to pressure from Washington to produce strategically sensitive goods such as semiconductors and electric vehicle batteries in the US.Happy New Year. What are you most looking forward to in 2022? Share your thoughts with us at [email protected] and we may feature your response in an upcoming newsletter. Thanks for reading FirstFT Americas.Coronavirus digest The world economy rebounded from the historic recession caused by Covid-19 better than economists expected in 2021 but it faces a harder path ahead in 2022. Who were the corporate winners and losers since the start of the pandemic? Find out here.US chief medical adviser Anthony Fauci has warned of an “unprecedented” surge as the country reported a record-breaking number of infections. U.S. Defense Secretary Lloyd Austin is one of those who has tested positive. He said he had mild symptoms and would attend meetings virtually for the next five days.Puerto Rico is facing a huge explosion in cases of Covid-19. As the New York Times reports, the island has had a 4,600 per cent increase in cases in recent weeks despite an apparently successful vaccination campaign.Schools in England are set to move some lessons online amid widespread absences caused by the rapid spread of the Omicron variant. Boris Johnson urged ministers to draw up “robust contingency plans” to tackle staff absences.Chinese officials have pledged to alleviate food shortages in Xi’an for residents locked in their homes as the country battles its worst Covid-19 outbreak since the pandemic started in Wuhan two years ago.Omicron has forced trade show postponements but organisers remain bullish.The day aheadNew Johnson & Johnson chief Joaquin Duato is set to become chief executive of J&J today, succeeding Alex Gorsky, who will move to the role of executive chair. See what else is in store for 2022 in our special edition of The Week Ahead newsletter. Israel interest rate announcement Economists expect the country’s policymakers to hold interest rates steady, according to a Reuters poll, but analysts anticipate an increasingly hawkish tone. (Reuters) Economic data IHS Market will give an idea of the health of the European manufacturing sector with December’s purchasing managers’ index. (WSJ)What else we’re readingM&A boom accelerates junior burnout at elite law firms Associates at the world’s top law firms have long viewed exhausting hours as part of a Faustian pact in which evenings, weekends and sleep are exchanged for eye-popping salaries. But junior lawyers have reached a breaking point as workloads soar and pandemic-induced anxiety and isolation rise.Royal insider Anne Glenconner: ‘I’m not frightened of anything’ At birth, Glenconner disappointed men; ever since, they’ve disappointed her. So she has compensated. She spent three decades as lady-in-waiting to Princess Margaret. “It’s not that I don’t like men! But ones that are near to one are absolutely maddening,” she told the FT’s Henry Mance.

Anne Glenconner: ‘I’ve been in the shadow all my life’ © James Ferguson

Ten economic trends that could define 2022 For a second year, the pandemic has reshaped the world, accelerating trends from population decline to digital revolution. Ruchir Sharma examines how these currents could define this year, from a slowing China to “greenflation” in commodity prices.Climate change and the battle for Canada’s forests Centuries-old forests dotting the landscape in British Columbia, Canada’s westernmost province, have become a battleground for two schools of thought about curbing climate change: one that wants to use their biomass for green power, and another anxious to protect carbon-absorbing trees. Pulp non-fiction: the worst business books of 2022 Some 10,000 business books are published annually in the US, the world’s biggest market. Almost all are unputdownable, of course, but inevitably just a few clunkers slip through publishers’ rigorous filters. Don’t miss Andrew Hill’s (entirely imaginary) examples of titles to avoid in 2022.ArtsThe eagerness to be at live performances, in-person events and experience art that’s tangible has not gone away. While pandemic uncertainty rocks the arts, here’s what to look forward to in a year of cultural highlights. More