Turkey Inflation Accelerates More Than Expected on Food, Alcoholby
December rate rises to 8.53% from 7%, faster than estimates
Central bank misses inflation target for a sixth year
Turkey’s consumer price inflation climbed more than estimated in December, led by a surge in food, alcohol and tobacco prices.
The annual inflation rate was 8.53 percent last month, compared with 7 percent in November, Turkey’s statistics institute said on Tuesday. The median estimate in a Bloomberg survey of economists was an increase to 7.6 percent, with 8.5 percent the highest prediction.
Food prices rose an annual 5.7 percent, compared with 3.6 percent a month earlier. Alcohol and tobacco prices rose 7.33 percent in the month and 32 percent over the previous year.
Here are the highlights from the report:
- Annual inflation rate rose for the first time since July
- The cost of transportation services, which are sensitive to the weakening lira and subsequent rises in fuel prices, rose an annual 12.4 percent through last month, compared with 9.6 percent in November
- Core inflation, which excludes volatile items such as food, energy and gold, accelerated to 7.5 percent from 7 percent in November
- Monthly inflation was 1.64 percent; the median estimate in a Bloomberg survey was 0.9 percent
- Producer prices rose an annual 9.94 percent through December, fastest pace in two years
- The central bank missed both its inflation target of 5 percent and its year-end forecast of 7.5 percent; because the miss was more than 2 percentage points, the central bank is required by law to write an open explanatory letter to the government
The central bank warned last month about inflationary risks from the rise in raw food prices, tax increases for tobacco products and increasing energy costs. Although the acceleration in headline inflation was higher than most estimates, it was probably within the range the bank saw as possible, according to Odeabank’s Sakir Turan, the only analyst in the Bloomberg survey who accurately predicted the annual and monthly inflation.
“There may not be a monetary policy response to the rise in the inflation rate unless there is a significant deterioration in financial conditions, such as a rapid depreciation in the currency,” Turan said. “The bank may maintain its policy in January, saying that such an acceleration in inflation was already something it had forecast.”
The lira weakened after the inflation report and was trading 0.6 percent lower at 3.5650 per dollar at 11:49 a.m. in Istanbul.
Food prices, historically a volatile category, make up roughly a quarter of the consumer price index and therefore cause deep fluctuations in the headline figure, Economy Minister Nihat Zeybekci said after the report in Ankara. Their weight in the inflation basket should be revised, he said.
“When you keep the weight of such a volatile item at a much higher level than peer countries, then the impact becomes much bigger,” he said.