ANKARA: Turkey reported its highest inflation rate in 15 years Monday fuelled by a spectacular drop in the Turkish lira, as analysts predicted that worse is probably to come.
Consumer prices rose 17.9 percent in August from the same month in the previous year --their highest increase since late 2003 -- up from 15.85 percent in July, according to the Turkish statistics office (TUIK), increasing pressure on the central bank to hike interest rates, reports AFP.The figure was higher than the Bloomberg consensus forecast of 17.6 percent.
The lira was worth 6.6 against the US dollar, a loss of nearly 1.5 percent on the day after 0930 GMT, rallying slightly after the central bank's indication that it would act at the next monetary policy committee meeting on September 13.
The highest annual rise in the month was in the cost of transport, up 27.13 percent, while prices for food and non-alcoholic drinks were up 19.75 percent, TUIK 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 aluminium 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 percent.
As tensions between the NATO allies remain high, Turkish President Recep Tayyip Erdogan on Sunday vowed that Ankara would pursue non-dollar transactions in trade with Russia and other countries, and accused the US of behaving like "wild wolves".Jason Tuvey, senior emerging markets economist at London-based Capital Economics, said the inflation rise "largely reflects the effects of a weaker lira".
But Deniz Cicek, economist at Istanbul-based QNB Finansbank, cautioned that the full effect of the "substantial" currency depreciation had not yet been seen.