Turkish inflation surges to highest since 2008

Annual inflation has been spurred to its highest in eight years as lira's weakness, political concerns and the direction of monetary policy take their toll.

A Turkish woman buys tomatoes in a local market in Istanbul, Turkey. Inflation has surged as food and transport prices rise. Sedat Suna / EPA

Turkey’s annual inflation hit its highest in more than eight years in March, surging to 11.3 per cent, as the prices of food, transport and beverages all showed double-digit increases, official data showed on Monday.

Consumer prices rose 1 per cent from the previous month, the data also showed, outstripping the 0.6 per cent increase predicted by a Reuters poll. Annual inflation was at its highest since October 2008.

Inflation has been stoked by chronic weakness in Turkey’s lira currency, which has been hit by political concerns and worries about the direction of monetary policy. The president Tayyip Erdogan has declared himself an “enemy” of interest rates, and repeatedly railed against what he says is the high cost of credit in Turkey.

The central bank has resorted to using unorthodox methods to tighten, fuelling investor concern it is wary of an outright rate hike. The surge in inflation may well be unwelcome news for Mr Erdogan, who is counting on broad support on April 16 in a referendum on constitutional change that would give him sweeping executive powers.

His adviser Bulent Gedikli said on Twitter that the upswing in inflation was temporary, and the impact of government measures would be seen from the second quarter onwards. He did not elaborate on the measures.

“It is possible to say that the inflation data is driven by the impact of foreign exchange rate, is temporary and that we will see the reflections of the measures taken from second quarter onwards,” he said following the release of the data.

Producer prices rose 16.1 per cent year-on-year, and 1 per cent month-on-month, the data also showed.

* Reuters

Follow The National's Business section on Twitter