- Title: Turkish inflation hits 15-year high of 25 percent
- Date: 5th November 2018
- Summary: ISTANBUL, TURKEY (NOVEMBER 5, 2018) (REUTERS) FRUIT VENDOR STALL FRUITS ON STALL PRICES OF FRUITS WOMEN SHOPPING FROM STALL (SOUNDBITE) (Turkish) BROKER, HULYA AYANOGLU SAYING: "It is the highest inflation rate of the past 15 years. 25 percent is very high and it reflects onto the prices. Before we can buy 5 apples for 5 lira but now we can only buy 4." VARIOUS OF WOMAN CLEANING VEGETABLES VARIOUS OF WOMAN KNITTING IN FRONT OF HER KNITTED GOODS STALL (SOUNDBITE) (Turkish) STALL OWNER, DILBER YAG SAYING: "Our purchasing power is down to zero. We can't buy anything, and we can't sell anything either. It's not just me - the newspaper stall next to me, a market, grocers. All of our stalls are empty. No one buys anything." MAN BUYING TRADITIONAL PASTRY FROM STREET VENDOR (SOUNDBITE) (Turkish) RETIRED, EYUP OZEN SAYING: "Of course, as a citizen I think that it is too high. That is why working class, even retired people are being heavily effected of those conditions. We are really struggling." PEOPLE WALKING ON STREET LONDON, ENGLAND, UK (NOVEMBER 5, 2018) (REUTERS) (SOUNDBITE) (English) CHIEF MARKET ANALYST, AXITRADER, JAMES HUGHES, SAYING: "Remember there is a trade discussion between the U.S. and Turkey and when you have a trade conflict going on with the biggest economy in the world and your inflation rate is up above 25% that of course is going to cause major issues. So, it could be incredibly damaging."
- Embargoed: 19th November 2018 13:21
- Keywords: economy lira inflation spending Turkey currency Turkish Erdogan finance consumer
- Location: ISTANBUL, TURKEY / ANKARA, TURKEY / LONDON, ENGLAND, UK
- City: ISTANBUL, TURKEY / ANKARA, TURKEY / LONDON, ENGLAND, UK
- Country: Turkey
- Topics: Budget/Taxation/Revenue,Government/Politics
- Reuters ID: LVA001958BJPP
- Aspect Ratio: 16:9
- Story Text: Turkish annual inflation surged to 25.2 percent in October, hitting its highest in 15 years and underscoring the impact on the wider economy of a debilitating currency crisis.
Month-on-month, consumer prices jumped 2.67 percent in October, Statistical Institute data showed on Monday, more than the 2.0 percent forecast in a Reuters poll.
Inflation, which Finance Minister Berat Albayrak predicted had now peaked, has been stoked by a lira slide that has also led the government to cut its growth forecasts.
Turkey's economy is expected to shrink this quarter and the next, discouraging any moves by the central bank to tackle the rising price pressures with a further hike in benchmark interest rates, which it raised sharply to 24 percent in September.
"I think the (central bank) would be loathe to have to increase policy rates again if the inflation data continues to disappoint as this will just make the recession deeper," said Timothy Ash, a strategist at Blue Bay Asset Management.
"They will assume, rightly, that deflation and recession will eventually do the trick on inflation. But they need time."
The lira edged down to 5.4525 against the dollar by 1231 GMT from 5.43 before the data.
The currency remains down around 30 percent this year, despite a partial recovery from a sell-off driven by concerns about the rising inflation and deteriorating ties with Washington.
Month on month, headline inflation was led by a 12.74 percent surge in clothing and shoe prices and a 4.15 percent rise in housing.
Year on year, producer prices rose 45.01 percent and core inflation 24.34 percent.
Finance Minister Albayrak - whose father-in-law, President Tayyip Erdogan, is a self-declared enemy of high interest rates - said he now expected inflation to dip significantly.
"We clearly see a much more positive course in November and December," he said in an interview with private broadcaster A Haber on Monday.
Referring to speculation about a hard landing for Turkey's economy, he added: "No one should expect Turkey to hit the brakes too hard to stop the car."
Albayrak announced a "full-fledged fight" against inflation in October, calling on all companies to offer 10 percent discounts on items impacting it until year-end.
Also in October, the central bank left rates unchanged as it watched for the impact of September's hike.
But the rise in inflation means real interest rates - their level discounting price rises - have fallen deeper into negative territory.
Albayrak last week also announced a partial cut in consumption tax expected to trim inflation and temporarily boost consumer spending. Ratings agency Moody's on Monday (November 5) called the measure credit-negative and said it risked piling renewed pressure on the lira.
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