Turkey’s inflation rate rose to nearly 25 per cent in September, official statistics showed on Wednesday, as the economy suffers further from the Turkish lira’s dramatic fall.
The unexpectedly bad figures come amid continued concerns over domestic monetary policy and the government’s steering of the economy as well as a bitter spat with the US which saw the lira fall by 25 per cent against the US dollar in August.
Consumer prices rose 24.52 per cent in September from the same month last year, up from a 17.9 per cent increase recorded in August, according to the Turkish statistics office (TUIK).
The figure is the highest since August 2003, the year President Recep Tayyip Erdogan became premier a role he held until 2014 before becoming head of state. The new inflation rate is also significantly higher than the Bloomberg consensus forecast of 21.1 per cent.
Finance Minister Berat Albayrak admitted the figures were higher than expected, but insisted: “We have left the worst behind us.”
Albayrak told NTV broadcaster the government would outline measures to combat inflation next week, adding he believed “the trend in inflation will break in October.”
But Inan Demir, an economist at Nomura, believes it is “still too early to say that the worst is behind us as pent-up inflationary pressures have built up in categories ranging from fuel to bread”.
The lira was hit hard by a diplomatic row between Nato allies Washington and Ankara over Turkey’s detention of an American pastor for two years on terror-related charges.
The row deepened after Washington imposed sanctions on two Turkish ministers and doubled steel and aluminium tariffs in August.
The Turkish lira weakened to 6.06 against the US dollar, a loss of 1.5 per cent on the day, after the data were released but rallied slightly to 6.04 after 1300 GMT on Wednesday. The currency has lost 37 per cent of its value against the greenback since the beginning of the year.
There was a brief reprieve for the lira last month when the central bank increased its main policy rate — the one week repo auction rate — from 17.75 per cent to 24 per cent.
However, Erdogan has previously said high rates cause high inflation and once described interest rates as “the mother and father of all evil”.
Economists said the larger-than-expected inflation rise would put further pressure on the central bank to raise rates again at the next MPC meeting on October 25.
But Jason Tuvey, senior emerging markets economist at London-based Capital Economics, said “given the scale of last month’s rate hike and continued bellicose comments from President Erdogan, we suspect that policy will be left unchanged”.
Albayrak said in September that Ankara expected inflation to be 20.8 per cent at the end of 2018, moderating to 15.9 per cent in 2019.