Turkey’s consumer price inflation climbed more than estimated in January, edging toward the 10% level central bank governor Erdem Basci doesn’t want to exceed.
Consumer prices roses an annual 9.58% through January, up from 8.81% the previous month and almost double the bank’s official target, according to figures released on Wednesday by Turkey’s statistics bureau. The median prediction of economists in a Bloomberg survey was 9.5%.
Basci said on January 26 that inflation won’t slow to the bank’s 5% target until 2018, and that policy makers were focused on trying to keep the rate under 10% in the first quarter. Curbing rising prices is a critical issue for Turkey, which relies on foreign capital inflows to finance its current- account deficit.
The central bank is under conflicting pressures, with the government urging lower rates to revive economic growth, and investors and the International Monetary Fund calling for tighter policy to stem inflation. Basci, citing global financial volatility, backtracked last month on his pledge to abandon his current multiple-rate corridor for a single rate after the US Federal Reserve raised borrowing costs for the first time in a decade.
“Ultimately the lira will bear the brunt of the consequence of high inflation,” said RBS economist Gabor Ambrus, who sees the currency weakening to 3.25 per dollar over the next 12 months. The currency weakened by 20% last year, and Ambrus said the central bank’s current monetary policy stance isn’t tight enough to protect it from further depreciation.