Turkey: Inflation skyrockets in September, markedly overshoots expectations
October 3, 2018
Consumer prices rose 6.30% from the previous month in September, up from August’s 2.30% rise, according to data released by the Turkish Statistical Institute (Turkstat). September’s price increase was chiefly driven by higher prices in the transportation; furnishing and household equipment; and food and non-alcoholic beverages sub-sectors.
Inflation increased for the sixth consecutive month, soaring from 17.9% in August to 24.5% in September—an over one-decade high—fueled by the huge depreciation of the currency observed in August. In addition, core inflation reared up from 17.2% to 24.1%. The figures will renew pressure on the Central Bank to continue hiking rates.
Looking ahead, inflation could rise further in the near term, as the pass-through effects from the weaker lira continue. Producer price inflation reached 46.2% in September, and firms could pass these costs on to consumers in the coming months. However, price pressures should then gradually ease on softening domestic demand, although the extremely volatile currency remains a key source of uncertainty to the outlook, and elevated inflation expectations will make it difficult to reduce inflation rapidly.
Turkey Inflation Forecast
Last month, FocusEconomics panelists saw inflation ending 2018 at 20.7% and 2019 at 13.7%. Given September’s inflation figure significantly overshot expectations, our panelists’ forecasts are likely to be revised up in the new report, to be published on 30 October.
Author: Oliver Reynolds, Economist