After the central bank cut its policy rate despite rising prices, annual inflation in Turkey reached a record 24-year high of 85.51% in October, according to official data released on Thursday.
Since the central bank started reducing its policy rate in November of last year, the lira fell and inflation has increased. President Tayyip Erdogan has long sought an easing cycle that runs counter to the world’s tightening cycle.
The central bank has cut its policy rate by 350 basis points in the past three months, to 10.5%, and has promised another cut next month as the final move in the current easing cycle.
Erdogan has called for a single-digit policy rate by year’s end and controls the bank’s decisions.
Consumer prices went up by 3.54% month over month, according to the Turkish Statistical Institute, below the 3.60% forecast in a poll. Consumer price inflation (TRCPIY=ECI) was expected to be 85.60% annually.
When Turkey was trying to put an end to a decade of high inflation, the annual inflation rate in October was the highest since June 1998.
Clothing prices increased by 8.34% month over month, followed by food prices which rose by 5.09% and home furnishings and equipment prices which increased by 4.38%.
Food prices came in second with a rise of 99.05%, followed by furniture and home items at 93.63%, with transportation, which includes gas prices, leading the annual rise with a rise of 117.15%.
In the most recent poll, the median forecast for year-end inflation was 70.25%, while the Turkish central bank last week increased its forecast to 65.20%, representing its fourth upward revision of the year.
Low-interest rates are given priority in the government’s economic program to increase exports and production and achieve a current account surplus.
In October, the domestic producer price index increased 7.83% month over month and 157.69% annually (TRPPIY=ECI).