Turkish inflation rate up to 15%

Annual Turkish inflation rose 15 per cent in January from 14.6 per cent a month ago. Core inflation, which strips out food and energy prices, also increased to 15.5 per cent, the Turkish Statistical Institute (Turkstat) said in a report on Wednesday.

The amount was markedly higher than analyst expectations, which averaged at 14.8 per cent or below.

Central bank rate hikes have drawn in moderate flows of foreign capital, helping to stabilise the lira, and the policy mix has improved, ratings agency Fitch said in a report on Tuesday. But the bank has limited independence and the government’s combined goals for inflation, economic growth and the current account deficit lack credibility, Fitch said.

The breakdown shows goods inflation at 16.5 per cent – the highest since mid-2019, up from 15.9 per cent a month ago. “This is attributable to food, energy, and some core goods despite benign alcoholic beverages and tobacco prices, thanks to a tax reduction on tobacco products,” commented ING chief economist for Turkey, Muhammet Mercan, in a note. Elevated services inflation driven by rent and transportation services was also an important component, though we saw a marginal decline in the annual figure to 11.5 per cent, Mercan added.

“The data shows challenging inflation dynamics, with high pricing pressures, sticky services inflation and the lagged effect of exchange rate developments,” he noted.

Food has remained the biggest contributor to the headline number with 64 basis points, attributable to the processed food prices; the monthly reading in this group turned out to be the highest January figure in the current inflation series. Unprocessed foods on the other hand, were down slightly, with a decline in fresh fruits and vegetables. These normally see a seasonal jump averaging at around 12 per cent in the first months of previous years, Mercan said. Accordingly, we saw a decline in annual inflation in this group to 18.1 per cent.

The outlook indicates significant producer-price-driven cost pressures on the inflation outlook.