Turkish inflation hits highest rate in 8 years

Turkey’s inflation in March hit its highest annual rate in over eight years, reaching over 11 percent, according to official data yesterday. Consumer prices rose 11.3 percent in March from the same period in 2016, the highest annual rate recorded since October 2008, the state statistics agency said. Monthly inflation meanwhile was 1.0 percent in March from February, it added, with food, transport and alcohol prices showing strong rises.

The rise was sharper than expected, after a tentative recovery in the value of the Turkish lira following heavy losses earlier this year. Economists said that the figures indicated that inflation was still worryingly stuck in double-digit territory and made a mockery of the central bank’s nominal inflation target of five percent.

Ozgur Altug, chief economist at Istanbul-based BGC Partners, warned there was a “high” risk of seeing 12 percent annual inflation in the next two months and would “remain at doubledigit level throughout 2017” but fall to 8.6 percent in December.

William Jackson and Liam Carson of London-based Capital Economics predicted the data would not prompt an interest rate hike by the central bank, partly due to government unwillingness to risk subduing growth. “The recent rise in the lira, last month’s rate hike, and renewed pressure from the government to reverse the tightening cycle make this unlikely.”

But they added: “Nonetheless, there is no scope to loosen policy.” One of President Recep Tayyip Erdogan’s advisors Bulent Gedikli suggested on Twitter there would be better figures later in the year as the government seeks to allay fears over the economy before the April 16 referendum. “It is possible to say the inflation data is due to the exchange rate effect and it is temporary, that we will see the reflections of measures taken after the second quarter,” Gedekli said. Meanwhile, Economy Minister Nihat Zeybekci insisted inflation would decline after May, in an interview with CNN Turk broadcaster.

In less than two weeks, Turks will decide whether to boost Erdogan’s powers under a new system that would see the role of the premier axed and replaced with one or more vice presidents.

The economy-which has shown significant signs of weakness for the first time under Erdogan’s rule-is set to be a key issue in the poll but the government was gladdened by stronger than expected 2016 growth of 2.9 percent. — AFP