Turkey’s annual inflation rate increased in April, reaching its highest level in around nine years, as a result of a weak Turkish Lira in several sectors, according to official data released on May 3.
Consumer prices in Turkey rose 11.87 percent year-on-year in April from 11.29 percent in March, data from the Turkish Statistics Institute (TÜİK) showed. Annual consumer price inflation was also at the highest level since October 2008.
April’s consumer price inflation was driven by food prices which rose 1.23 percent from a month earlier.
Clothing and footwear prices also climbed 9.13 percent as the season turned from winter to spring, when most people shop for apparel.
In some street bazaars, the price of some produce like tomatoes rose 70 percent in recent weeks. Red meat prices have also continued to rise, despite a number of measures to ease costs for consumers.
The highest annual increase was 21.65 percent on alcoholic beverages and tobacco, according to the TÜİK data. This was followed by transportation at 17.94 percent and food and non-alcoholic beverages at 15.63 percent.
Annual core inflation, which excludes the impact of volatile items such as food and energy, slowed from 9.5 percent in March to 9.4 percent in April, while the rise in headline inflation continued.
Turkey’s Central Bank raised its inflation forecasts for this year and 2018 on April 28, saying it was ready to tighten policy further if needed, while adding that it was confident its recent steps would start to bear fruit in the months ahead.
At a quarterly presentation, the bank raised its mid-point forecast for inflation at the end of 2017 to 8.5 percent from a previous forecast three months ago of 8 percent. It lifted its forecast for the end of 2018 to 6.4 percent from 6 percent and predicted that the rate would stabilize at around 5 percent in the medium-term.
Gov. Murat Çetinkaya said monetary policy would remain tight until there was a significant improvement in the inflation outlook.
He said the bank’s sharp monetary tightening since January would start to impact inflation over time.
“The CBRT [Central Bank] has implemented a strong monetary tightening since January to contain the deterioration in the inflation outlook,” the bank said in written highlights of Çetinkaya’s comments.
“The first impacts of the monetary tightening appeared in financial indicators, whereas its lagged effects on inflation will be observed in time ... Inflation is expected to fall in the upcoming months,” he added.
Risks to food inflation – another major determinant of inflation forecasts – are, however, considered to be on the upside, according to the bank’s report.
“Due to the recovery in the exports of food products and the impact of the exchange rate developments, food inflation might exceed current projections, which are based on the assumption that measures taken by the Food Committee will considerably balance the upside risks to food prices,” it underlined.
The Central Bank surprised investors by hiking the highest of its multiple interest rates on April 26, lifting its late liquidity window rate by 50 basis points to 12.25 percent.