The annual inflation rate increased to 8.81 percent in December from 8.1 percent in November, the Turkish Statistical Institute (TurkStat) reported on Monday. The Central Bank of the Republic of Turkey (CBRT) had predicted in late October that the year-end inflation rate will stand at 7.9 percent after a one-point hike from its earlier prediction, while pulling up its prediction for 2016 by one point to 6.5 percent.The consumer price index (CPI) increased 7.67 percent in 12 months' moving averages basis and 0.21 percent in December from the previous month, the report said.The year-end inflation rates are one of the key determinants in salaries of public employees and retirement pensions. Wages of public employees will receive an additional one percent increase due to high inflation numbers. Speaking to Turkish broadcaster NTV following TurkStat's announcement, Mehmet Şimşek, deputy prime minister in charge of economy, said December was a very busy month and the government should now focus on reforms. "The outlook on inflation is not the one that we have desired," Şimşek said, adding that the recent increase in the minimum wage would affect overall inflation by 1.1 to 2.2 percent, with the government continuing its efforts to minimize this effect.The annual increase in food and non-alcoholic beverages category, which affect households and inflation numbers the most, was 10.87 percent. But food prices are expected to drop in the medium-term. "Inflation could drop to about 8 percent in coming months, thanks to declining food prices in the wake of the Russian sanctions on Turkish produce," according to Attila Yeşilada, an economist with GlobalSource Partners in Istanbul.After Turkish F-16 jets shot down a Russian SU-24 bomber jet, which had violated national airspace after repeated warnings on Nov. 24, the Russian government imposed sanctions on a large number of Turkish food exports. However, the prices of green pepper, eggplant and tomatoes reportedly skyrocketed, with a single tomato costing up to $2 in Russia. The Kremlin was the champion of December inflation with respective increases of 34.31, 30.75 and 14.89 percent.The highest annual increase was in the hotels, cafes and restaurants category with 13.23 percent, followed by recreation and culture with 11.56 percent, miscellaneous goods and services with 11 percent, furnishings and household equipment with 10.95 percent. The highest monthly increase was 1.24 percent in the food and non-alcoholic beverages category, followed by furnishings and household equipment with 0.53 percent, miscellaneous goods and services with 0.45 percent, housing with 0.43 percent and hotels, cafes and restaurants with 0.33 percent. The highest monthly decrease was 1.98 percent in the clothing and footwear category, while transportation, communications and recreation and culture saw price decreases with respective drops of 0.57, 0.22 and 0.17 percent.Regarding the average prices of 426 items on the index in December 2015, the average prices of 54 items remained unchanged, while the average prices of 253 items increased and the average prices of 119 items decreased.Consumer spending continues to drive the economy. Household final spending is close to 70 percent of gross domestic product (GDP), according to World Bank statistics. But the CBRT forecasts moderate domestic spending in the coming year, while increased exports will play a greater role in driving economic growth."The composition of growth has shifted toward net exports with the support of rising demand from the European Union economies," the bank's Monetary Policy Committee said in its Dec. 22 policy meeting minutes. The central bank also predicted better price stability in the coming year, as the effects of previous currency volatility ceased to push inflation higher. And relatively low price increases from regulated services will also help future inflation to stabilize. "Electricity price adjustments will help disinflation but even that sounds counter-intuitive. That's due to the fact that the 6.8 percent adjustment was the lowest in recent years – the increase was 9 percent in October 2014," commented Bora Tamer Yılmaz, an economist with Ziraat Securities in Istanbul, in a note published on Monday. That relatively low increase in the price of electricity will have an important disinflationary effect, Yılmaz added. "In sum, we may see about 21 basis-point inflationary effects in the first six months of the year due to the announced administrative price adjustments," he said. However, he expected annual inflation to hit a peak during the January to February period.