Turkish Inflation Resumes Rise in January

Turkish inflation slightly surged 1.06 percent in January from December after two months of slowdown, reaching an annual rate of 20.35 percent, driven by higher food prices, official statistics showed Monday.

The highest monthly increase was recorded in food, at 6.43 percent, according to the Turkish statistics office (TUIK).

In recent months, Turkey has been facing a sharp surge in its inflation rate, which hit a 15-year high in October at more than 25 percent.

The central bank revised down its inflation forecast last week.

It said 12-month inflation was likely to be 14.6 percent at the end of 2019, down from the 15.2 percent estimate given in October.

The inflation forecast for 2020 also was cut to 8.2 percent from 9.3 percent and the central bank said it hopes price rises will stabilize at around five percent in the medium term.

Jason Tuvey, senior emerging markets economist at London-based Capital Economics, said in a note that inflation was expected to ease over the coming months.

“Looking ahead, the jump in food inflation should prove temporary and we expect inflation to ease over the next few months,” he said.

But he noted the central bank’s latest inflation report struck a relatively more hawkish tone than expected.

“As a result, we think that the MPC (monetary policy committee) is now likely to hold off from lowering interest rates until the middle of the year when inflation is likely to fall sharply,” he said.

The Turkish lira lost nearly 30 percent of its value against the dollar in 2018, against the backdrop of diplomatic tensions with the United States which exacerbated last August.

After the currency crisis, the central bank hiked interest rates by more than 6 percentage points to 24 percent.

But President Recep Tayyip Erdogan opposes high interest rates and there have been concerns over the bank’s independence.