Turkish Inflation Climbs to Highest in 20 Years on Lira, Energy

(Bloomberg) -- Turkey's inflation rate accelerated to a near 20-year high in January, driven by rising energy, food prices and a weak lira.

Prices rose an annual 48.69% through last month, up from 36.08% in December. The median estimate in a Bloomberg survey of 19 analysts predicted an acceleration to 48%.

Monthly inflation was 11.1%, compared with the median estimate of 10.95% in a separate survey.

Key Insights

Producer prices rose 10.45% through the month, bringing annual inflation to 93.53%
The rate of inflation in energy rose to 76.38% from 42.93% in December. Government unveiled historic increases in the price of household electricity in January with as much as 130% hike
Annual price gains in food, which makes up roughly a quarter of the consumer basket, accelerated to 55.61%, fueled by bad weather conditions. The central bank revised its year-end food inflation estimate to 24.2% from 13.9% previously
A core inflation index showed prices excluding volatile items such as food and energy rose an annual 39.45%, up from 31.88% in December

Markets

The lira was trading lower at 0.9% lower at 13.5827 per dollar as of 10:07 a.m. in Istanbul

Background

The acceleration takes Turkey's benchmark interest rate adjusted for inflation to around negative 35%, the lowest real yield by far among emerging markets
Retail price inflation in Istanbul, Turkey's commercial capital, climbed to 50.91% last month from 34.18% in December
The central bank will hold its next rate-setting meeting on Feb. 17
Turkey's central bank held rates steady in January after it slashed 500 basis points in late 2021. The cuts sent the lira into a tailspin that's accelerated consumer price rises. Although lira sustained stability in this year, the local currency still lost around 35% of its value against the dollar since the September rate cut