(Bloomberg) -- Turkey’s consumer inflation climbed near the highest levels since President Recep Tayyip Erdogan came to power 15 years ago, spurring calls for higher interest rates to rein in prices.
The inflation rate rose for a sixth month to 24.5 percent in September from a year earlier, above all expectations in a Bloomberg survey where the median estimate was 21.1 percent. The monthly rate was 6.3 percent, driven by an across-the-board surge provoked by the lira’s meltdown.
Wednesday’s inflation report puts monetary policy makers in a bind. The central bank raised borrowing costs last month to their highest level in nearly two decades, yet prices are gaining at their fastest pace since June 2003.
Given his distaste for higher interest rates and an apparent slowdown in the economy, the bank has little room to act against further price surges. But with the lira losing as much as 40 percent of its value against the dollar since the beginning of the year, the worst may be yet to come.
“An inflation print so bad that it truly feels like old Turkey,” said Inan Demir, an economist at Nomura International in London. “But this is simply too bad to ignore. Note that annual headline inflation is now above the bank’s policy rate at 24 percent, which calls for another rate hike.”
The lira weakened as much as 1.6 percent after the data release and was trading 1.2 percent lower at 6.0579 to the dollar at 10:21 a.m. in Istanbul.
Below are some of the highlights from the report published by Turkstat on its website:
- Food prices, which make up nearly a quarter of the inflation basket, rose an annual 27.7 percent, from 19.8 percent in August
- Energy inflation accelerated to 27.03 percent from 21.3 percent
- Producer prices rose 46.15 percent from 32.13 percent
- Core inflation, a gauge that excludes volatile items such as food, energy and gold, climbed to 24.05 percent from 17.2 percent; median estimate in a Bloomberg survey called for an acceleration to 19.3 percent
- Apparel prices rose 17.16 percent from 13.6 percent and the cost of housing rose 21.84 percent from 16.3 percent
- Monthly consumer inflation rate was the worst since April 2001 and above the median estimate of 3.4 percent in a separate Bloomberg survey
(Updates with analyst comments.)
