ANKARA: A surprise slowdown in Turkey’s consumer prices in November is unlikely to ease investor pressure on the central bank to maintain tight monetary policy after the lira plunged to a record. The annual inflation rate dropped to 7 percent, mainly due to low food prices, according to official data released on Monday. The median estimate in a Bloomberg survey of economists was an acceleration to 7.4 percent.
The central bank unexpectedly raised borrowing costs last month, a decision that failed to stem a rapid depreciation of the lira, amid investor concern that policy makers will hesitate to deliver more increases to counter the impact of higher U.S. interest rates. At the same time, the central bank is also under pressure from President Recep Tayyip Erdogan to cut borrowing costs. “The weaker lira will take its toll on prices from December, when consumer inflation will likely start accelerating again,” according to Kapital FX economist Enver Erkan, whose forecast of 7.1 percent was the closest among analysts surveyed by Bloomberg. “If inflation is an indicator, Turkey needs to increase interest rates, but it will prove to be difficult because of concerns over growth.”
