Türkiye’s annual inflation climbed more than expected in August, official data showed on Monday, driven by a decline in the Turkish lira and recent tax hikes that came amid a shift in the central bank’s monetary policy.
Measured in the consumer price index (CPI), the annual inflation surged to 58.94% over 12 months ending in August, the Turkish Statistical Institute (TurkStat) said.
The inflation reached a 24-year high of 85.5% in October and stood at 47.83% in July after regressing to as low as 38.21% in June.
Month-over-month, consumer price inflation was 9.09%, easing slightly from 9.49% a month earlier, the TurkStat data showed.
Price rises in transportation drove the monthly measure higher, while price hikes for hotels, cafes and restaurants drove the annual measure.
The data showed transportation prices rising by 70.2% and those of restaurants and hotels by 89.3%.
Treasury and Finance Minister Mehmet Şimşek – who has spearheaded a summer policy U-turn meant to rein in prices – said the fight against inflation would take time, and patience was needed in the transition period, hinting at more interest rate hikes in the period ahead.
"We know that the fight against inflation will take some time. We are in the transition period," Şimşek said on the social media site X, formerly known as Twitter.
"We will do whatever is necessary (monetary tightening, credit policy and income policies) to bring inflation under control and then lower it," he noted.
"We are absolutely determined to fight inflation."
The central bank and economists have forecast an upward trend for the rest of the year. The bank said last week that the annual CPI is likely to peak around 60% at the end of 2023, the upper bound of a forecast range it gave in its latest inflation report.
In a Reuters poll, annual inflation was predicted to be 55.9%, with monthly inflation seen at 7%.
The latest reading could pile up pressure on the central bank to further hike interest rates.
After elections in May that saw President Recep Tayyip Erdoğan extend his rule into a third decade, the bank reversed a yearslong policy of low rates.
Under its new governor, Hafize Gaye Erkan, the bank initiated a monetary tightening in June and has since hiked its key policy rate by 1,650 basis points to 25% to stem inflation. It also made changes to macroprudential measures to support the cycle.
The bank has said the tightening would be further strengthened "as needed gradually," adding that disinflation would be established in 2024.
The lira slipped slightly after the price data to 26.78 versus the dollar by 7:24 a.m. GMT.
The domestic producer price index was up 5.89% month-over-month in August for an annual rise of 49.41%, according to the data from TurkStat.