Inflation in Turkey hit a 24-year high after an 85.5 percent interest rate cut
ISTANBUL, Nov 3 (Reuters) – Turkey’s annual inflation rose to a new 24-year high of 85.51 percent in October, official data showed on Thursday, slightly below forecasts, after the central bank cut its interest rate. despite rising prices.
Inflation has risen since last year, when the lira fell after the central bank began cutting interest rates in a cycle of easing long sought by President Tayyip Erdogan.
Over the past three months, the central bank has cut its interest rate by a total of 350 basis points to 10.5%. It promised another cut this month as the final step in the current easing cycle, bucking the trend for global monetary policy tightening.
Consumer prices rose 3.54% month-on-month, the Turkish Statistical Institute said, below the 3.60% forecast in a Reuters poll. Annual consumer price inflation (TRCPIY=ECI) 85.60% was predicted.
Annual inflation in October was the highest since June 1998, when Turkey was trying to end a decade of high inflation.
Haluk Burumcekci, founder of Burumcekci Consulting, said the October print could be a peak for headline inflation unless the lira weakens further.
“We believe headline inflation may peak before the lira depreciates from current levels,” he said. “A significant fall (inflation) can occur only in the range of 70-75% due to the base effect of the last month of the year.
The lira’s 44% fall last year and 29% this year was the main reason for the rise in inflation, in addition to rising energy prices.
Clothing prices rose by 8.34% month-on-month, followed by food prices, which increased by 5.09%, and furniture and household appliances, which rose by 4.38%.
Transportation, which includes gasoline prices, led the annual increase of 117.15%, followed by food prices at 99.05% and furniture and home appliances at 93.63%.
The median forecast for year-end inflation in the latest Reuters poll was 70.25%, while Turkey’s central bank raised its forecast to 65.20% last week, its fourth revision this year.
The government’s economic plan prioritizes low interest rates to stimulate manufacturing and exports with the aim of achieving a current account surplus.
The domestic producer price index rose 7.83 percent month-on-month in October, with an annual increase of 157.69 percent. (TRPPIY=ECI).
The reports of Gdańsk News and Nevzat Devranoglu. Writing by Ali Kuchukgochmen Editing by Raisa Kasolowski, Tomasz Janowski and Emelia Sithole-Matarize
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