Turkish Inflation Climbs as Lira Slump Feeds Into Prices

(Bloomberg) -- Turkey’s consumer inflation accelerated more than expected last month as the weak lira continued to fuel price gains.

Key Insights

• The inflation rate rose to 25.2 percent from 24.5 percent in September, above the median estimate of 25 percent predicted by economists in a Bloomberg survey.
• The annual inflation figure remains highest since June 2003.
• The monthly rate was 2.67 percent, compared with 2.5 percent in a separate survey.
• A breakdown of consumer prices shows the headwinds policy makers are facing from a slump in the lira earlier this year; central bank Governor Murat Cetinkaya last week identified it as the biggest threat to price stability in the short term
• Housing inflation accelerated to 25.7 percent from 21.8 percent the previous month, making the biggest monthly contribution to the increase in annual inflation.
• Food prices, which make up nearly a quarter of the inflation basket, rose an annual 29.3 percent, up from 27.7 percent in last monthly report
• Transportation costs gained an annual 32 percent, down from 36.6 percent, limiting the rise in the headline figure.
• Energy prices rose an annual 29.4 percent from 27 percent.
• Core inflation rate, which excludes volatile items such as food and energy, rose to 24.3 percent from 24.1 percent.

Analyst Comment

• “Not that bad, could have been much worse after the terrible September print,” Tim Ash, BlueBay Asset Management LLC strategist, said after the report. “People will begin to see this data as offering hope of a turning point.”

Market Reaction

• The lira weakened after the report by Turkstat in Ankara and was trading 0.2 percent lower at 5.4381 per dollar at 10:12 a.m. in Istanbul. The currency lost as much as half of its value against the dollar amid a diplomatic row with the U.S., but has rebounded by more than 25 percent from August’s all-time low, according to data compiled by Bloomberg.

Get More

• Read more on why pricing behavior remains the biggest challenge to price stability in the short term.

--With assistance from Onur Ant.

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

To contact the editors responsible for this story: Benjamin Harvey at bharvey11@bloomberg.net, Amy Teibel, Shaji Mathew

©2018 Bloomberg L.P.