(MENAFN- Arab Times) Turkish inflation accelerated slightly more than forecast in December on the back of food price rises, official data showed on Friday, nudging annual inflation up to a higher-than-expected 7.40 percent. Inflation has been driven higher in recent months by the weakness of the lira and higher-than-expected global oil prices, prompting the central bank in October to raise its inflation forecasts for the full year.
Turkey has an official 5 percent inflation target and a most recent central bank forecast of 6.8 percent for 2013. Turkish consumer prices rose 0.46 percent month-on-month in December, just above a Reuters poll forecast of a 0.4 percent rise, the Turkish Statistics Institute said. Consumer prices had been flat in November. Food prices rose 1.46 percent on the month. A further sharp slide in the lira in the last two weeks, triggered by concerns about a high-level corruption investigation, as well as New Year consumption tax hikes are expected to push inflation up more and build pressure on the central bank to raise interest rates.
Data
The lira was firmer at 2.1630 against the dollar after the data, compared with 2.1687 earlier. The currency weakened to a record low of 2.1885 to the dollar on Thursday. In November, consumer prices rose much less than expected, helped by lower food and non-alcoholic beverage costs. Producer prices rose 1.11 percent in December, for an annual rise of 6.97 percent. Analysts had warned that inflation targets were in danger by the plunging lira put under pressure by a corruption scandal roiling the pro-business government. "We think the depreciation pressure on the Turkish lira is to continue going forward, as heightened political tension adds to the already ... negative picture," Finansbank economist Gokce Celik said in a statement.
But on Tuesday Deputy Prime Minister Ali Babacan said risks stemming from the political turmoil were only temporary even after a spokesman said the crisis had cost the economy $100 billion. The central bank is trying to shore up the lira by selling off some of its dollar reserves. Turkey's economy and the lira were already weakened by the money tightening of the US central bank. The lira was being quoted 2.1732 on Friday afternoon against the US dollar, after touching a new low of 2.18 on Thursday.
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