Turkey sees highest inflation in past 15 years at nearly 18 percent

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People walk in a long corridor lined by Turkish flags in a historic bazaar in the central Sultanahmet district of Istanbul on August 11, 2018. / AFP PHOTO / Yasin AKGUL

Inflation in Turkey rose again in August to nearly 18 percent, official statistics showed, the highest since late 2003 and coming after the Turkish lira dramatically weakened against the US dollar last month.

Consumer prices rose 17.9 percent in August over the same month last year, up from 15.85 percent in July, according to the Turkish Statistics Institute (TurkStat), increasing pressure on the central bank to hike interest rates.

The figure was higher than the Bloomberg consensus forecast of 17.6 percent.

The lira was worth 6.5 against the US dollar, a loss of nearly 2 percent on the day, after the data were released.

The highest annual increase in August was in the cost of transport, up 27.13 percent, while prices of food and non-alcoholic beverages were up 19.75 percent, TurkStat said in a statement.

Last month the Turkish lira was sent into a tailspin by a bitter diplomatic spat with the United States over Turkey’s detention of an American pastor for almost two years on terror-related charges.

Washington imposed sanctions on two Turkish ministers last month and doubled steel and aluminum tariffs, putting further pressure on the Turkish currency.

At one point the lira weakened to more than 7 against the greenback before it rallied, although the currency’s loss against the dollar in the last month alone still stands at over 25 per cent.

The central bank’s next monetary policy committee meeting is on Sept. 13, and markets have been hoping for a significant rate rise to calm the currency crisis.

After Monday’s data release the bank sought to reassure the markets that it would take the “necessary actions to support price stability” in September after recent developments suggested “significant risks to price stability.”

“The monetary stance will be adjusted at the September monetary policy committee meeting in view of the latest developments,” the bank said in a statement.

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