Turkish inflation hits 11.2 per cent

ISTANBUL: Turkey’s annualised inflation rate rose to 11.2 per cent in September, the state-run agency Turkstat reported on Tuesday, with the costs of education and transportation seeing the highest monthly increases.

The increase was slightly below market expectations, but shows a return to higher costs, after a period this year in which the inflation rate dipped into single digits.

There was a significant increase in core inflation, which hit its highest levels since February 2004, according to QNB-Finans bank.

“What is even more concerning is that the upward trend will likely extend to the upcoming months,” according to a research note from the bank, which said inflation may hit 11.5 per cent by the end of the year.

Other analysts predictions.

President Recep Tayyip Erdogan, in a speech to members of his ruling Justice and Development Party (AKP) in Ankara, demanded lower interest rates in order to bring made similar down inflation, a position that is the opposite of orthodox economic thought.

“We cannot yet ensure a decline in inflation. Why? Because of high interest rates. This is my claim. It is directly proportional — if interest rate drops so does inflation,” Erdogan said, repeating a refrain he has used in recent years.

Last month, the central bank raised its inflation forecast for the end of the year to 9.72 per cent.

The bank has kept interest rates on hold, in order to stabilise the lira, despite pressure from Erdogan.

The lira is back under pressure versus both the dollar and the euro, and is currently near its low against the European currency.

Turkey has seen strong economic expansion this year, in part due to rising exports, fiscal stimulus and credit growth, which has also led to consumer-side demand increases, putting pressure on inflation.

Despite the export growth, the trade deficit has continued to widen.