ISTANBUL: Turkish inflation probably exceeded 60 percent for the first time this year as higher energy costs complicate efforts to contain domestic demand with jumbo interest-rate hikes.
The pace of annual price gains accelerated to nearly 62 percent last month from almost 59 percent in August, according to the median forecast in a Bloomberg poll of economists. Turkey’s statistics office is due to release the data on Tuesday.
TCMB'nin arka kapı müdahalelerinin Ağustos ayı itibarıyla $226 milyara çıktığını hesaplıyoruz.
Bu ortalama aylık $11 milyar müdahaleye tekabul ediyor.
1/3 pic.twitter.com/ypoNp5w5mN
— Selva Baziki (@SelvaBaziki) October 2, 2023
Projections for the month-on-month figure anticipate a 4.8 percent increase, nearly halving the 9.1 percent recorded in August, according to a separate survey. This reflects the diminishing impact of summer tax hikes, even as the costs of food and services persist in driving up annual inflation. In Istanbul, annual retail inflation reached 73 percent in September, a slight decrease from the 74 percent recorded in August, as reported by the Istanbul Chamber of Commerce on Sunday.
Economist Selva Bahar Baziki anticipates that inflation will peak at 70 percent in the second quarter of next year before gradually decelerating to an end-of-year rate of around 40 percent in 2024. However, she highlights the possibility of even higher price gains in the event of further currency depreciation or a sustained rise in oil prices.
The Turkish central bank has embarked on an extensive series of consecutive rate increases to suppress domestic demand, which has been a significant driver of inflation in the past two years. President Recep Tayyip Erdogan’s pro-growth policy, relying on low borrowing costs leading up to this year’s election, has been a key factor. Since the formation of Turkey’s new economy team in June, the central bank has more than tripled its key rate to 30 percent.
However, an uncontrollable upside risk has emerged during this period. The international crude benchmark, Brent, has surged almost 30 percent to nearly $100 a barrel since June. As Turkey heavily relies on energy imports, the central bank’s current estimate for the annual average oil price is $79.4. Economist Erol Gurcan of Yatirim Finansman notes that given the rising trend of oil prices, the central bank’s monetary tightening campaign might need to elevate rates to a higher peak level than initially envisioned.
Rising energy costs are also exerting pressure on the lira, which Turkey aims to stabilize in its fight against inflation. Bank of America Corp. strategists foresee the Turkish currency weakening to 30 per dollar in the last quarter of 2023. The central bank’s rate-setting committee is scheduled to convene on October 26, with Governor Hafize Gaye Erkan announcing the bank’s revised year-end inflation estimates a week later.
