A key measure of Turkey’s consumer prices that excludes volatile items such as food and energy accelerated to the highest level in more than 13 years, data from the Turkish Statistics Institute (TÜİK) showed on Jan. 3.
Core prices rose 12.3 percent in December, the highest since January 2004.
Headline inflation rate was at 11.92 percent, regressing from a 14-year peak at 12.98 percent in November, mainly due to price increases in the food and transportation sectors.
Consumer prices saw monthly change of 0.69 percent in December above forecasts.
High inflation is one of the biggest challenges facing the Turkish economy, which has grown strongly after a short-lived downturn following a failed coup in July 2016.
The highest annual increase was 18.24 percent in transportation in December, followed by food and non-alcoholic beverages with 13.79 percent and miscellaneous goods and services with 12.77 percent, according to TÜİK data.
The highest monthly increase was again 1.69 percent in transportation, followed again by food and non-alcoholic beverages with 1.52 percent and furnishing and household equipment with 1.18 percent, TÜİK data showed.
The government’s medium-term program in September forecast end-2017 inflation at 9.5 percent, while the Central Bank has an official target of 5 percent, which it has repeatedly failed to meet.
Commenting on the December 2017 figures, DenizBank Investment Group strategist Orkun Gödek underlined that the monthly rise in the inflation rate was slightly above the market’s predictions.
“The high course of core inflation rate will push the Turkish Central Bank to maintain its current monetary policy,” Gödek told state-run Anadolu Agency, adding that consumer prices might see a bounded decrease in the first half of 2018 on the back of a base effect.
According to some analysts, high core inflation is actually worse than high headline inflation, as the former can mainly be eased by monetary policy tools.
“Core inflation does not include volatile items, like energy or food. Therefore, it is becoming more and more difficult to fight against this,” said SPINN Consultancy Co-Founder and academic Özlem Derici Şengül.
“Core inflation includes secondary effects and parity volatilities. Despite a slight ease in the currency parity, the core inflation continued to rise. This means that the loss in the Turkish Lira’s value started to spill over to services prices after food and energy prices,” she said, as reported by Bloomberg HT, adding that this also showed that there was deterioration in pricing behaviors.