Turkish cbank says forex volatility remains risk to inflation
Turkey hikes tax on cigarettes, alcoholic drinks
ISTANBUL, Dec 1, (RTRS): Turkey’s central bank said on Thursday that foreign exchange volatility caused by global uncertainty remains a risk to inflation and that global market turmoil was keeping a “firm lid” on the pace of economic growth.
In the minutes published on Thursday of its policy meeting last week, at which it hiked interest rates for the first time in almost three years, the bank also said it would use required reserves and other liquidity tools to support markets if financial conditions tighten more than expected.
Meanwhile, Turkey has raised the special consumption tax on alcoholic drinks and tobacco products, according to a notice in the government’s Official Gazette on Thursday, a move one official said would push up prices by some 3-6 percent.
The increase coincides with a sharp decrease in the lira currency, which is likely to stoke inflation, which at 7.16 percent is sharply above an official target of 5 percent.
The fixed tax on alcoholic drinks, excluding wine and similar beverages, will be increased by 10 percent. That is expected to push their prices up by 3-4 percent, the government official told Reuters following the announcement of the increases, which went into effect from Thursday.
Tobacco prices will increase by an average of 5-6 percent following a 0.07 lira ($0.02) hike in the tax on tobacco products, the official said. The price of a packet of cigarettes was set to rise by around 0.50 lira as a result of the tax move, he said
In November, the Turkish lira had its worst month since the 2008 financial crisis, hit by a resurgent US dollar, and concern about a widening crackdown after a failed coup.
In another report, foreign investors in Turkey sold a net $969.2 million in government bonds and a net $11 million in stocks in the week ending November 25, Turkish central bank data showed on Thursday.
The data also showed foreign currency deposits held by locals rose to $144.07 billion, from $143.07 billion a week earlier. Gross forex reserves fell to $99.04 billion, from $101.28 billion a week earlier, the data showed.
Meanwhile, Turkish exports rose 5 percent year-on-year in November to $11.95 billion, the Turkish Exporter’s Assembly (TIM) said on Thursday.
In the first 11 months of the year, exports fell 2.4 percent to $128.97 billion, TIM said. TIM releases its figures almost a month before official data from the Turkish Statistics Institute.
Meanwhile, retail prices in Istanbul, Turkey’s biggest city, climbed 0.59 percent month-on-month in November for a year-on-year rise of 7.40 percent, the Istanbul Chamber of Commerce said on Thursday.
Istanbul is home to a fifth of Turkey’s population of 79 million people. Turkish inflation data for November is to be released on Monday.
Meanwhile, the Turkish lira hit a new low against the dollar on Thursday as worries about the country’s political and economic outlook and concerns about the impact of rising oil prices on energy imports weighed on sentiment, traders said.
The main Istanbul share index dropped 2.2 percent while the yield on the 10-year benchmark bond rose to 11.31 percent from 11.13 percent a day earlier.
The lira weakened 10 percent to the dollar in November - its worst month since the 2008 financial crisis - hit by a resurgent US dollar and concern about a widening crackdown after Turkey’s failed July coup attempt.
It dropped another 1.5 percent on Thursday to a record 3.4920 as oil swept to a six-week high after OPEC agreed to cut crude output to help clear a glut.