Turkish inflation expected to tick up again in January

ISTANBUL: Turkey's annual inflation is expected to rise slightly again in January to 14.68%, a Reuters poll showed on Friday, after it overshot official estimates last year despite a tight policy stance from the central bank.

Inflation was stuck around 12% for most of 2020, before unexpectedly rising in the last two months to 14.60%, mainly due to an increase in food prices.

In a Reuters poll of 14 economists, the median estimate for annual inflation in January was 14.68%, with forecasts ranging between 14.20% and 15.33%.

The median for the month-on-month rise was 1.4%, with forecasts ranging between 1.00% and 2.00%.

The central bank, which repeatedly said it would target inflation more strongly under new governor Naci Agbal, has raised its policy rate by 675 basis points to 17% since November.

Presenting the first inflation report of the year, Agbal said on Thursday that central bank would keep policy tight until inflation comes down to the 5% target, which he said would not happen until 2023.

Agbal's presentation strengthened the message that the central bank has no intention to cut rates prematurely, said Piotr Matys, senior emerging markets forex strategist at Rabobank.

He added that a structural solution needs to be found for food prices, which have been the main driver behind the rise in inflation in recent months.

"Until concrete structural measures are fully implemented, the CBRT may have to raise interest rates further if international food and other commodity prices continue to rise, which would have an adverse impact on inflation expectations," Matys said in a note.

The central bank expects inflation to come down to 9.4% by the end of 2021, lower than economists' forecasts.

In the Reuters poll, the median forecast of 11 economists for inflation at year-end stood at 10.80%, with estimates ranging between 10.00% and 11.60%.

The Turkish Statistical Institute is scheduled to announce January inflation data at 0700 GMT on Feb. 3.