Turkey's Annual Inflation Rate Rises in November -- Update

Turkey's annual inflation rate in November jumped to its highest level in 14 years, as food prices remain elevated, bolstering expectations that the central bank may tighten monetary policy at its meeting next week.

The annual consumer price index rose to 12.98% in November--the highest reading since 2003--from 11.9% in October, the state statistics agency said Monday. This exceeded forecasts in a survey by The Wall Street Journal and is more than double the central bank's 5% inflation target.

The data showed annual food and non-alcoholic beverages prices rose to 15.78% in November from 12.74% in October. Annual transportation costs surged by 18.56%.

Core inflation indicators, excluding food and beverages, tobacco, energy and gold prices, jumped to 12.1% in November from 11.8% in October.

After the data, Deputy Prime Minister Mehmet Simsek tweeted on his official Twitter account that a persistent downward trend in inflation is likely from December onward.

"The government will provide the necessary support to achieve a lasting reduction in inflation," Mr. Simsek tweeted.

The central bank last month raised the year-end inflation forecast to 9.8% from 8.7%, while policymakers lifted their inflation estimate for next year to 7% from 6.4%, citing the recent depreciation of the Turkish lira.

Turkish lira slumped 15% against the dollar since mid-September due to concerns over central bank policy and strained relations between the U.S. and Turkey.

The central bank recently took a series of measures to counter the falling value of the Turkish lira and raised average funding costs for banks by 0.25 percentage points to 12.25%.

"While the next MPC meeting on Dec. 14 is likely to be a close call, we think today's data will be enough to prompt another move to tighten policy," said Liam Carson, an emerging Europe economist at Capital Economics in London. "We expect that to come via a 25bp hike in the late liquidity rate."

In its latest meeting in October, the central bank held all interest rates steady. The central bank is scheduled to have its next monetary policy meeting on Dec. 14.

"Headline inflation looks set to fall towards 10% next year, but we think the central bank will still raise the late liquidity window rate by 50-75bp to curb inflationary pressure," said Erkin Isik, a strategist at TEB, a unit of BNP Paribas.

Write to Yeliz Candemir at yelizcandemir@wsj.com

(END) Dow Jones Newswires

December 04, 2017 07:21 ET (12:21 GMT)