Turkey inflation hits new 24-year high of 83% after rate cuts

Turkey inflation hits new 24-year high of 83% after rate cuts. Turkish annual inflation climbed to a new 24-year high of 83.45% in September, data showed on Monday, still lower than forecast, after the central bank surprised markets by cutting rates twice in the last two months.

Despite soaring prices, the central bank was seen cutting its policy rate again this month, after President Tayyip Erdogan called for single-digit interest rates by the end of the year.

Inflation has surged since November last year, as the lira slumped following cuts to the policy rate by the central bank, in an unorthodox easing cycle long sought by Erdogan.

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Month-on-month, consumer prices rose 3.08%, the Turkish Statistical Institute said, less than a Reuters poll forecast of 3.8%. Annually, consumer price inflation was forecast to be 84.63%.

It was the highest annual figure since July 1998, when it stood at 85.3% and Turkey was battling to end a decade of chronically high inflation.

September inflation was driven by transport prices, which surged nearly 118% year-on-year, while food and non-alcoholic drinks prices jumped 93.05%.

Despite the relentless rise in inflation, Erdogan said last week he had advised the central bank to lower its policy rate at its upcoming meetings, a day after saying he expects interest rates to come down to single digits by year-end.

JP Morgan said inflation was likely to remain in the “abnormally high range until policies get orthodox”, adding that it expects the easing cycle to “continue until it cannot.”

“Monetary policy decisions have become disconnected from macro fundamentals and have become almost irrelevant for short-term inflation dynamics,” it said in a note.