Turkish Inflation Climbs to Three-Year High, May Have Peaked

Turkish inflation climbed for a fourth consecutive month in January to the highest level since November 2008 after food prices surged. Bonds yields fell on speculation the rate may decline in the remainder of the year.

The inflation rate advanced to 10.6 percent, the statistics agency in Ankara said on its website. That matched the median estimate of eight economists in a Bloomberg survey. In the month, prices rose 0.6 percent. Producer price inflation slowed.

“Inflation is likely to have peaked at this point and, provided that the currency remains relatively stable, we are likely to see a gradual but faster improvement,” Tevfik Aksoy, an economist for the region at Morgan Stanley in London, said in an e-mailed report to clients today. “We expect the first main decline in inflation to materialize in May.”

The lira has rebounded 8 percent against the dollar this year after sliding 18 percent in 2011, the biggest drop among global currencies tracked by Bloomberg. Inflation has more than doubled from a four-decade low of 4 percent last March as investors pulled money out of emerging markets and the government raised prices, prompting the central bank to lend at above the benchmark rate of 5.75 percent.

Yields on benchmark two-year bonds fell 8 basis points to 9.29 percent as of 5:32 p.m. in Istanbul, the lowest level in almost four months. Yields had peaked at 11.69 percent in January, a 2 1/2-year high. The lira rose 0.2 percent to 1.7531 per dollar.

Lira May Gain

There is a 70 percent chance the lira will strengthen to 1.72 per dollar in the next three months, according to implied probability calculated from currency options.

Turkey took the necessary measures to battle inflation, though it may miss its year-end target by “a little,” central bank Governor Erdem Basci said on Jan. 31. He lifted his forecast for 2012 to 6.5 percent, compared with an official goal of 5 percent. There’s no need for additional tightening in monetary policy, Basci said.

“We’re talking about a small increase in annual inflation, which is in line with central bank expectations,” said Nilufer Sezgin, chief economist at Istanbul-based brokerage Ekspres Invest. “The outlook and risk perception abroad is good, and in the short term, inflation is expected to hover at high levels.”

Food prices increased a monthly 1.1 percent in January and transport prices rose 2.1 percent, the statistics office said. The price of clothing slumped 7.9 percent.

Inflation in 12 months’ time was forecast at 6.91 percent in a fortnightly survey of executives and economists published by the central bank on Jan. 20. Predictions rose from 6.85 percent two weeks earlier.

Producer price inflation declined to an annual 11.1 percent from 13.3 percent in December, the office said.

To contact the reporters on this story: Emre Peker in Ankara at epeker2@bloomberg.net; Ali Berat Meric in Ankara at americ@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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