Inflation has risen since last year when the lira fell after the central bank began cutting interest rates in an easing cycle long desired by Turkish President Tayyip Erdogan.
The central bank has reduced its policy rate by 350 basis points in the last three months, to 10.5%. It promised another cut this month as the final step in the current easing cycle, which runs counter to global monetary policy tightening.
Consumer prices rose 3.54% month on month, according to the Turkish Statistical Institute, falling short of the 3.60% predicted in a Reuters poll. Consumer price inflation was predicted to be 85.60% on an annual basis.
In October, annual inflation reached its highest level since June 1998, when Turkey was attempting to end a decade of high inflation.
According to Haluk Burumcekci, founder of Burumcekci Consulting, if the lira does not fall further, the October print could be the peak for headline inflation.
“We think that the headline inflation may have seen its peak unless there is a depreciation from the lira’s current level,” he said. “A significant decline (in inflation) could only happen towards the 70-75% range due to the base effect in the last month of the year.”
The lira’s 44% decline last year and 29% this year was the primary cause of soaring inflation, along with rising energy prices.
Clothing prices rose 8.34% month on month, followed by food prices rising 5.09% and furnishing and household equipment prices rising 4.38%.
In the most recent Reuters poll, the median forecast for year-end inflation was 70.25%, while Turkey’s central bank raised its forecast to 65.20% last week, the fourth upward revision this year.
The government’s economic plan prioritizes low-interest rates in order to boost production and exports and achieve a current account surplus.
In October, the domestic producer price index increased 7.83% month on month, for a 157.69% annual increase.
Turkey’s inflation has reached its highest level since 1998. Turkey’s inflation has reached its highest level since 1998.
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