Inflation sets three-year record, sees double digits
ANKARA
![Inflation sets three-year record, sees double digits](http://image.hurimg.com/i/hurriyet/75/0x0/59c6b24945d2a027e8397d1d.jpg)
Consumer prices are the highest since November 2008, an official data shows. DAILY NEWS photo
Turkey’s inflation rate through 2011 was more than double the expectations at the beginning of the year, setting a three-year record, according to official data released yesterday.Consumer prices rose 10.45 percent in December compared with the same month a year earlier, according to the Turkish Statistical Institute (TÜİK).
The figure is the highest since November 2008.
Producer prices, meanwhile, rose 13.33 percent over the given period.
Inflation surged from 4.3 percent when Erdem Başçı took over as Central Bank governor in April.
“Turkey definitely has an inflation problem,” Seyfettin Gürsel, a professor at Istanbul’s Bahçeşehir University, told the Hürriyet Daily News in an interview yesterday.
It will be a difficult year for inflation in 2012 compared with the ambitious official target although the detailed data showed the rate is slowing down, said Gürsel.
The official year-end inflation goal was 5.5 percent while the medium term program declared by the government last October forecast the rate at 7.8 percent.
The market expectations for 2011 were 10.26 percent, according to a Central Bank survey in late December. The official inflation goal for 2012 is 5 percent.
A loss of value in the Turkish Lira and hikes in some of the tax rates contributed to the double-digit inflation rate and food-price inflation, Akbank Economic Research said in an emailed statement to investors.
The double-digit inflation rate is expected to continue in 2012’s first four months, said Akbank researchers.
The exchange rate and commodity prices contributed 5 percentage points to consumer inflation, while the tax hikes contributed 1.6 percent, according to the Central Bank.
The cost of goods leaving Turkish factories and mines rose 13.3 percent in the 12 months through December, up from 13.7 percent the previous month, the TÜİK said.
More action necessary
In October, the Central Bank began tightening monetary policy to curb the lira’s depreciation and its impact on inflation.
The bank’s policy rate, the one-week repo rate, stands at 5.75 percent while the upper limit of its interest rate corridor is 12.5 percent.
“The effectiveness of the Central Bank’s current monetary policy mix is still questionable,” Özgur Altuğ, chief economist at BCG Partners in Istanbul, said in an emailed comment.
While Turkey was one of the world’s best-performing economies in 2011, the lira lost nearly 22 percent against the dollar as the Central Bank pursued a complex policy mix of lower interest rates, higher bank reserve requirement ratios and a wider gap between lending and borrowing rates to counter a huge current account deficit.
“The bank is stretching the limits of its unorthodox policy framework in order to stabilize the lira and bring inflation under control,” Goldman Sachs Group economist Ahmet Akarlı wrote in an emailed report yesterday. “More policy action will be necessary,” Bloomberg News quoted him as saying.