Turkish inflation starts the year off high

ISTANBUL

The rise in the consumer price index in January was driven by the food, alcoholic beverages-tobacco and transportation items. CİHAN Photo

Turkish inflation raced out of the traps in the New Year, climbing to highest level of the past six years in January, official data has showed, signaling a tough first half for Turkish consumers.

As the consumer prices bounced 1.72 percent on monthly basis, the index rose 7.48 percent year-on-year, after climbing to 7.40 percent in December, the data announced by the Turkish Statistical Institute (TÜİK) on Feb. 3 revealed.

Inflation in the country increased for the second straight month in January, remaining well above the Central Bank’s target of 5 percent.

The bank had raised its mid-point forecast for year-end inflation to 6.6 percent from a previous forecast of 5.3 percent last week during the presentation of this year’s first quarterly inflation report.

The bank had warned the first half of the year will be tougher in terms of price developments, forecasting tax adjustments, impacts on currency rate rise and energy prices will cause inflation to fluctuate in the first half of the year. However the inflation is likely to drop sharply in the second half after the recovery of those conditions, it added.

The rise in the consumer price index in January was driven by the food, alcoholic beverages-tobacco and transportation items, Garanti Investment Chief Economist Gizem Öztok Altınsaç said.

Arguing the upwards movement in core inflation indicates a future rise in headline consumer price index, Altınsaç, warned that the impact of volatilities of the currency rates will be more visible on inflation in the upcoming period.

She also added possible hikes on natural gas and electricity prices may add to the pressure on inflation.

The Central Bank had raised all of its key interest rates to save the Turkish Lira from sliding further against the dollar and euro, in a move that is expected to push inflation upwards in the upcoming period as well.

However, the Central Bank had judged the further weakening of lira would do more harm on inflation than the interest hikes.