Record High Inflation Rate of Turkey Since 2008

Consumer prices in Turkey rallied to a record high over 13 years, excluding volatile items such as food and energy which puts more pressure on the central bank to lower its inflation which would allow reduction of interest rates.

Core prices increase an annual rate of 11.8 percent in October as the highest since January 2004. As a whole, consumer inflation increased more than anticipated reaching 11.9 percent influenced by the low value of lira and costly energy costs which affects the rates. This has been the highest rate since 2008 and surpassed the median approximated value of 11.5 percent based on the poll from Bloomberg economists.

The data came out weaker than anticipated following the statement from the central bank Governor Murat Cetinkaya advising a two-month inflation blackspot in November. Consumer prices will only decline in the end month of the year since the value of lira depreciates while the oil prices increase. The central bank next rate decision is expected on December 14.

Although, it is said that overall consumer inflation might not decline as how the central bank presumed it to be which is already expected to trail behind along with the headline. The consumer inflation as a whole would not drop as much according to the managing director of Istanbul-based Turkey Macro View Consulting.   

Inflation may get worse and restricts the capacity of the central bank. The central bank has anticipated the central bank to bring down the cost of lending and foresees the decline in inflation in 2018. Taking into account the level of core inflation, reducing it may not happen according to Gökhan Sözer, governor of Edirne province

The lira declined to 3.8297 by 0.9 percent against the greenback. The yields on two-year lira notes increased by 17 basis points to 13.21 percent since April 2009, according to the data from Bloomberg.  

The governor said that the monetary policies are tight enough to reach the 5 percent target inflation of the bank for long-term along with the central bank most recent inflation report. Also, he mentioned that they will keep the monetary policies until 2018 and when the bank has attained the goal of 7 percent consumer inflation by the end of the year.