Turkish annual inflation rose more than expected to 14.6 percent in December as food costs jumped, official data showed on Monday, keeping pressure on the central bank for tight policy even after it sharply hiked interest rates at the end of 2020.
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The consumer price (CPI) rise -- the highest since mid-2019 -- sets the stage for months of expensive basic goods for Turks.
For new central bank governor Naci Agbal, it tees up a tough battle with inflation, analysts said.
Month-on-month, prices rose 1.25 percent in December, the Turkish Statistical Institute said, also above the median forecast of 0.9 percent in a Reuters poll.
Economists in the poll expected annual inflation would be 14.2 percent last month. In November, it jumped unexpectedly to 14 percent on the back of a weak lira currency that has pushed import prices higher.
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A year of double-digit inflation and a lira that touched a series of record lows prompted the central bank to reverse an easing cycle in mid-2020.
Under Agbal, the bank hiked rates by 675 points since November alone, to 17 percent. While the lira has rallied in the last two months, analysts said it would stoke inflation well in to the new year, exacerbating upward pressure from food.
“Food and forex weigh on the data. Food inflation may continue to be the most important indicator of inflation in 2021,” said Sekerbank chief economist Gulay Elif Yildirim.
“A structural fight against inflation is necessary, especially in food prices, instead of rate hikes,” she said adding she does not expect another rate hike this month.
Food and non-alcoholic drinks as well as transportation prices were both up more than 20 percent year-over-year last month, the data showed, with dry weather playing a role in rising farming and production costs.
The producer price index separately rose 2.36 percent month-on-month in December, for an annual rise of 25.15 percent.
Agbal said last month policy will remain tight in 2021 to finally lower inflation in a lasting way and hit a target of 5 percent by 2023. The bank forecasts 9.4 percent inflation by the end of 2021, lower than most analysts.
Three months ago, the government had forecast end-2020 inflation would come in at 10.5 percent.
Separate data showed Turkey’s economy is slowing heading into the winter, thanks to coronavirus restrictions and tighter credit. A measure of manufacturing activity dipped in December from the previous month, showing the sector expanded only slightly.
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