Turkey inflation surges to nearly 16pc

Ankara: Inflation in Turkey rose again in July to nearly 16 per cent, official statistics showed on Friday, increasing pressure on the central bank to hike interest rates. Consumer prices reached 15.85 per cent in July from the same month in the previous year, slightly up from 15.39 per cent in June, according to the Turkish statistics office. However, despite marking a new high since late 2003, the figure was lower than the Bloomberg consensus of 16.4 per cent. The highest annual rise in the month was in transport, up 24.21 per cent, while prices of food and non-alcoholic drinks were up 19.40 per cent annually.
The Turkish lira has come under heavy pressure after the central bank perplexed many economists by keeping interest rates unchanged at its last July 24 meeting despite the high inflation. The lira then lost further value as the United States slapped sanctions on Turkish ministers over the long detention of a US pastor in the Aegean province of Izmir. The lira hit 5.1 per cent to the greenback after the sanctions were imposed but rallied slightly following the inflation data to 5.0 after 0900 GMT.
The central bank sharply hiked its inflation forecast for 2018 to 13.4 per cent on Tuesday, up from 8.4 per cent in April.
William Jackson, chief emerging markets economist at London-based Capital Economics, said the inflation data made it “harder to justify the central bank’s decision last week to leave interest rates unchanged”.
Jackson predicted the bank will raise its benchmark one-week repo rate 200 basis points over the coming months, bringing it to 19.75 per cent.
But Berat Albayrak, the new Finance Minister who is also President Recep Tayyip Erdogan’s son-in-law, said the government’s “number one goal” was for inflation and interest rates to fall.
Erdogan has said rates are the “mother and father of all evil”, urging lower rates to help reduce double-digit inflation, a position that flies in the face of economic orthodoxy.
“We will see single-digit inflation in 2019,” Albayrak told NTV broadcaster on Friday.
Istanbul-based QNB Finansbank chief economist Gokce Celik forecast year-end inflation would reach 16.2 per cent, raising a previous prediction of 15.5 per cent. Despite the sub-consensus headline data, “today’s print is far from providing relief,” said Celik, warning the “underlying trend will continue to deteriorate” and be magnified by the ongoing currency depreciation. — AFP