Coronavirus: Lira reaches new low as Turkish inflation remains high

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Turkey's lira slid to a new all-time low on Thursday after data showed annual inflation remained near 12 percent and stubbornly above the central bank's forecasts last month, raising risks for an economy emerging from a bad coronavirus slump.

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The currency, which hit 7.438 versus the dollar, has kept import prices elevated and offset any downward price pressure from lockdowns earlier this year. Raising the states for Turkey, new COVID-19 cases have jumped in recent weeks.

Consumer prices rose 11.77 percent in August, in line with the previous month and a bit less than the median of 11.91 percent in a Reuters poll. The monthly figure was 0.86 percent, the Turkish Statistical Institute said, versus a poll forecast of 1 percent.

Inflation has remained firmly in double digits all year and last touched the central bank's 5 percent target in 2011. The bank raised its year-end forecast to 8.9 percent in July, betting inflation would start dipping as soon as that month.

But few analysts expect that to happen soon, and a recent Reuters poll put inflation at 11 percent by year end.

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“There are no drivers in place to bring inflation magically down to help support the lira -- the inflation-FX spiral is worsening,” said Tatha Ghose, analyst at Commerzbank.

The largest consumer price rises in August were in goods and services at 5.09 percent, the data showed. Prices related to transportation, restaurants and hotels rose, while clothing and shoe prices dropped.

The producer price index was up 2.35 percent month-on-month for an annual rise of 11.53 percent.

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