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Turkey’s annual inflation expected to climb near 21 pct, poll shows

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Following the plunge of the Turkish lira to historic lows, the median forecast of 15 economists in a Reuters poll came in at 20.7 percent for November, which would be the highest level in three years, with forecasts ranging from 19.3 to 21.06 percent.

According to the poll, the monthly rate was seen at 3 percent, with forecasts ranging from 1.8 to 3.3 percent.

Overall inflation is being pushed higher by a rise in prices of processed food like bread, rent and fuel as well as the lira depreciation to record lows as the central bank continues its easing cycle despite rising inflation expectations, Reuters said.

Under pressure from President Recep Tayyip Erdoğan, the central bank cut its policy rate last Thursday by 100 basis points to 15 percent and signaled further easing. The bank has now slashed rates by 400 basis points since September in what many analysts say is a risky policy mistake.

Before a partial rebound, the lira hit a record low, trading at 13.50 to the dollar and 15.20 to the euro on Tuesday afternoon, due to statements defending the monetary easing by Erdoğan, who is widely criticized for subscribing to the unorthodox belief that high-interest rates cause high inflation instead of slowing it down.

Turkish inflation has been in double digits and well above emerging market peers for most of the last four years, eating into Turks’ earnings and undermining support for Erdoğan.

In October, inflation jumped by 19.89 percent on an annual basis, and by 2.39 percent on a monthly basis.

Erol Gürcan, an economist at Yatırım Finansman, responded to a Reuters question on when inflation will peak, saying that it could be in the first half of 2022.

“Year-on-year CPI could reach a peak level in 1H22 (maybe in May) at 27 percent, but we should note that risks are upward, and the peak level could be over 30 percent,” Gürcan was quoted as saying.

Meanwhile, the Turkish lira also plunged from around 12.10 to 12.65 on Friday, following a court decision that kept civil society leader Osman Kavala in jail despite Western pressure and the risk the case could further harm Ankara’s relations with Europe as well as Erdoğan’s remarks again supporting the monetary easing.

Year-end inflation forecasts of all the economists participating in the poll were above the central bank’s recently raised forecast of 18.4 percent, Reuters said, adding that the poll also showed the median of year-end inflation forecasts was 22 percent, with estimates from 20 to 24.7 percent.

The Turkish Statistical Institute (TurkStat) is expected to announce November inflation on December 3.

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