Turkish inflation up more than expected to 14.6%

FILE PHOTO: People wait in line to buy vegetables sold in a tent set up by the municipality in the Bayrampasa district of Istanbul, Turkey, February 11, 2019. REUTERS/Murad Sezer

ISTANBUL (Reuters) -Turkish inflation edged higher than expected to 14.6% year-on-year in December as food costs jumped, official data showed on Monday, keeping pressure on the central bank for tight monetary policy even after sharp interest rate hikes.

Month-on-month, consumer prices rose 1.25% in December, the Turkish Statistical Institute said, also above the median forecast of 0.9% in a Reuters poll.

Economists in the poll expected annual inflation would be 14.2% last month, compared to November when it jumped unexpectedly to 14%.

A year of double-digit inflation and a weak lira – which touched a record low in early November – prompted the central bank to reverse an easing cycle in mid-2020.

Under new governor Naci Agbal it hiked rates by 675 points since November alone, to 17%. While the lira has rallied in the last two months, analysts said the earlier rise in import prices continued to lift broader inflation.

Last month, the food and transportation subcategories were both up more than 20% year-over-year, the data showed. The producer price index separately rose 2.36% month-on-month in December, for an annual rise of 25.15%.

Agbal said last month policy will remain tight in 2021 to finally lower inflation in a lasting way and hit a target of 5% by 2023. The bank forecasts 9.4% inflation by the end of 2021, lower than most analysts.

The government had initially forecast end-2020 inflation would come in at 10.5% in its medium-term programme.

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