Inflation in Turkey accelerated the most since August in January, a result that will test the central bank’s attempt to control inflation, soon after the regulator ended interest rate hikes last month. Although central bankers said they were done tightening, the surprise departure of Governor Hafize Gaye Erkan and her replacement by Fatih Karahan, previously deputy governor, showed the central bank “remains ready to act” if the outlook for inflation worsens.
Turkey’s monthly rate of inflation accelerated the most since August in January. Amid a sharp increase in the minimum wage and government tax changes, price growth accelerated to 6.7% month-on-month in January after five straight monthly declines, data released Monday showed. The median forecast of economists was for a level of 6.5%. The central bank’s latest forecast suggests that monthly inflation will slow in February.
On an annual basis, inflation accelerated minimally to 64.9% from 64.8% in December.
The latest acceleration of inflation is the result of temporary factors, according to Finance Minister Mehmet Simsek. “And its monthly pace will decline significantly from February to continue along our forecast trajectory”, he said after the data was released.
The policy course should become clearer this Thursday when Karahan presents a quarterly inflation report and answers questions from economists and reporters in Ankara.
One key area of concern is the services sector, which the central bank identified as one of the reasons cost pressures may continue to be felt.
Core inflation, which excludes volatile components such as food and energy sources, remained above 70% from a year earlier.
