Turkey’s inflation rate may end the year at 14.3 percent after lira woes

Turkey’s consumer price inflation rate may end 2020 at 14.3 percent, the highest level in major emerging markets after Argentina. which has been rocked by economic crisis.

Inflation may accelerate from 14 percent in November, Turkey's state-run Anadolu news agency said on Wednesday, citing an average estimate of 19 economists it questioned.

Turkey’s central bank, which raised interest rates for the third time in four months at a meeting last week, increased its year-end inflation forecast to 12.1 percent in late October from a previous 8.9 percent after the lira hit successive record lows. The government has targeted an inflation rate of 10.5 percent in an economic programme announced in September.

Monthly price increases were estimated at 1.02 percent, with forecasts ranging from 0.45 percent to 1.91 percent, Anadolu reported. The Turkish Statistical Institute is due to publish December inflation figures on Monday.

The central ban’s benchmark interest rate now stands at 17 percent compared with 8.25 percent in September. The bank has hiked rates from 10.25 percent since November when President Recep Tayyip Erdoğan sacked and replaced its governor as the lira slumped to a new record against the dollar.

Central bank governor Naci Ağbal has pledged to keep interest rates high next year as he focuses on slowing inflation towards a 5 percent medium-term goal. Investors are concerned that Ağbal’s plans may be undercut by Erdoğan, who says high interest rates are inflationary. But Erdoğan’s popularity among Turks has taken a hit by double-digit price increases and the lira’s declines against the dollar.

The lira traded at 7.37 per dollar on Thursday, stronger than the record low of 8.58 per dollar reached on Nov. 6. Losses this year total about 20 percent.

The central bank next meets to decide on interest rates on Jan. 21.