Turkey’s annual inflation rate is expected to hit 30.6 per cent in December, according to a Reuters poll.

The rate is breaching the 30 per cent level for the first time since 2003 as prices rose due to record lira volatility.

The 30.6 per cent median forecast of 13 economists would be the highest since May 2003, with forecasts ranging from 26.4 per cent to 37.3 per cent.

Inflation, which was around 20 per cent in recent months, has been driven by a lira slide to record lows after the central bank slashed its policy rate by 500 basis points since September, under pressure from President Tayyip Erdogan.

The month-on-month rise in prices was seen at nine per cent, according to the median, with forecasts ranging from 5.5 per cent to 14.6 per cent.

The central bank said temporary factors were driving prices higher and forecast that inflation would follow a volatile course in the short term.

The recent lira slide was reversed late on Monday last week when Mr Erdogan announced a scheme to protect lira deposits against currency volatility and state-backed market interventions triggered a 50 per cent surge in the currency’s value. 

Inflation has been in double digits and well above emerging market peers for most of the last four years, eating into Turks’ earnings and hitting support for Mr Erdogan.

According to the Turk-Is trade union confederation, food prices rose 25.75 per cent month-on-month in December, representing an annual rise of 55 per cent, up from 27 per cent in November, marking the largest rise in food inflation since 1987.

The central bank’s year-end inflation forecast was 18.4 per cent in a report published in late October, after the government had predicted an end-2021 annual inflation rate of 16.2 per cent.

(Reuters/NAN)