Turkey Inflation Returns to Double Digits and May Stay There

(Bloomberg) --

Turkish inflation returned to double digits in November, possibly limiting the central bank's ability to continue aggressively cutting interest rates.

Consumer prices grew 10.6% from a year earlier, compared with an increase of 8.6% in October, the Turkish statistics agency said on Tuesday. The median of 21 forecasts in a Bloomberg survey was 11%. Prices rose 0.4% in the month.

Key Insights

• Food inflation rose to 8.9% from 7.9% the previous month. It's below the central bank's year-end forecast of 10% after hovering above 15% for much of the year
• A core index that strips out the impact of volatile items such as food and energy rose to 9.3% from 6.7%, showing some deterioration in the underlying price dynamics. Annual producer price inflation rose to 4.3% from 1.7%; on a monthly basis, it fell 0.1%
• The statistical effect of a high base last year reversed as the headline figure dropped to 21.6% in Nov. 2018 from its peak of 25.2% a month earlier after a currency crisis
• The acceleration brings Turkey's real rate to 3.44%, still one of the highest among its emerging-market peers

Markets

• The lira briefly trimmed loss after the data and was trading 0.2% weaker at 5.7516 versus the dollar at 10:02 a.m. in Istanbul

Get More

• Morgan Stanley expects another inflation pick-up in December, to 11.3%; sees interest rates remaining in double digits through 2020
• Retail prices in Istanbul, the country's largest city, rose 1.1% on a monthly basis in Nov.
• Read more on the central bank's inflation expectations here
• Turkish central bank's next rates-setting meeting is scheduled for Dec. 12

To contact the reporter on this story: Cagan Koc in Istanbul at ckoc2@bloomberg.net

To contact the editors responsible for this story: Onur Ant at oant@bloomberg.net, Benjamin Harvey, Tony Halpin

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