Turkey has no room for errors after inflation spikes, JPMorgan says

The Turkish authorities have no room for policy errors after inflation climbed at a faster pace than expected in November, U.S. investment bank JPMorgan said.

Turkish Central Bank Governor Naci Ağbal needs to publicly commit to slowing inflation after Treasury and Finance Minister Lutfi Elvan said on Thursday that monetary and fiscal policy would work in tandem to manage inflation expectations, JPMorgan said, Dünya newspaper reported on Friday.

The country’s consumer price inflation accelerated to 14 percent in November from 11.9 percent in October, the Turkish Statistical Institute said on Thursday. The rate was the highest in 15 months and comes after the central bank hiked interest rates to 15 percent from 10.25 percent early last month.

Economists had expected inflation of 12.6 percent, according to a poll conducted by the state-run Anadolu news agency.

Recent stability in the lira - the currency dropped to an all-time low of 8.58 per dollar in early November but has since gained to about 7.8 per dollar - and tighter financial conditions for consumers and businesses mean future increases in the inflation rate may be limited, JPMorgan said.

The bank revised its inflation forecast for 2020 to 14.1 percent from 12.8 percent. It also changed its estimate for annual price increases next year to between 13 percent and 14 percent from a previous 12 percent to 13 percent, Dünya said.