Turkish Minute

Turkey’s inflation jumped to 15 percent in January: report

Turkey’s annual inflation rate climbed more than expected to 14.97 percent last month, data showed on Wednesday, driven by energy and food prices and pressuring the central bank to keep policy tight even after sharp interest rate hikes, Reuters reported.

Month-on-month, consumer prices rose 1.68 percent in January, according to the Turkish Statistical Institute, also above a Reuters poll forecast of 1.4 percent.

Turkish Finance Minister Lütfi Elvan said on Wednesday that the latest inflation figures showed Turkey was far from its targets. “The figures announced show we are far from our inflation targets. We will never compromise on our measures to achieve the target,” Elvan said on Twitter. “Quality and sustainable growth is not possible without price stability,” he added.

Turkish inflation has been stuck in double digits for most of the last three years and stood at 14.6 percent in December, well above the 5 percent target. The median poll forecast for January was for a rise to 14.68 percent.

Since Naci Ağbal was appointed its governor in November, the central bank has hiked its key rate to 17 percent from 10.25 percent, giving Turkey the tightest monetary policy of any major developed or emerging market economy.

Last week Ağbal reaffirmed a commitment to tight policy even if more “front-loaded” steps were needed.

The central bank governor, who like his predecessors has faced pressure from President Recep Tayyip Erdoğan to cut borrowing costs, also stood by an aggressive forecast that inflation would drop below 10 percent by year end, more than market expectations.

Analysts said electricity, gas and oil prices lifted the overall price index (CPI) last month, and food prices, which have hit Turks particularly hard, rose another 2.5 percent over the month and more than 18 percent in a year.

The lira rallied nearly 1 percent after the report to 7.13 versus the dollar. It is up more than 5 percent this year, by far the best performer in emerging markets largely due to the hawkish monetary policy.

“Policy tightening has been stepped up through a more orthodox approach, and a new economic team has placed strong emphasis in communications on sustaining disinflation,” Fitch ratings agency said this week.

The producer price index rose 2.66 percent month-on-month in January for an annual rise of 26.16 percent, the inflation data showed.

The statistics institute said protective masks were added to the CPI basket in 2021, given the coronavirus pandemic, and it raised the weighting of food and non-alcoholic beverages, and lowered that of restaurants and hotels.

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