Turkish Consumer Inflation Climbs More Than Expected in December

Turkey’s consumer prices rose more than expected in December, driven by a surge in energy costs and lingering impact of a weak lira.

Annual inflation climbed to 14.6% from 14% in November, more than the median estimate of 14.2% in a Bloomberg survey of analysts. Prices rose 1.25% from a month earlier, exceeding the 0.9% median expectation in a separate survey.

A weak lira and rapid credit growth underpinned by negative real interest rates kept inflation in double digits the entire year, forcing the central bank to raise its annual inflation forecast to 12.1% in October from 8.9% previously. New Governor Naci Agbal simplified policy and raised borrowing costs rapidly to put a floor under the currency and rein in prices.

Key Insights

  • A gauge of annual core inflation quickened to 14.31% from 13.26% in November, showing price dynamics when the impact of volatile items such as food, energy and gold is excluded
  • Food prices, which account for roughly a fifth of the consumer basket, rose 20.6%, compared to 21.1% during the same period
  • Energy price increases quickened to 5.64% from 4.28%, showing the impact of the lira’s decline from last year as well as the recovery in global oil prices during the last quarter of the year


  • The lira was little changed after the news and was trading 0.6% higher at 7.3943 per dollar at 10:07 a.m. in Istanbul

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  • Turkey’s central bank simplified policy andraised benchmark interest rate of one-week repo by 675 basis points to 17% since Agbal took over in November, pledging a return to orthodox policies
  • Retail prices in Istanbul, the country’s largest city, rose 1.36% on a monthly basis and an annual 14.4% in December
  • Producer prices rose an annual 25.15% through last month

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