ISTANBUL: Turkey’s annual inflation is expected to exceed 81% in August after the central bank delivered an unexpected rate cut despite continuing price pressures, a Reuters poll showed on Wednesday, and it was seen declining to just below 71% by end-2022.
Inflation has surged since last autumn, when the lira slumped after the central bank gradually cut its policy rate by 500 basis points to 14% in an easing cycle sought by President Tayyip Erdogan.
While inflation is not expected to fall in the next few months, the central bank cut its policy rate by another 100 basis points this month to 13%, citing indications of an economic slowdown.
Inflation has been further stoked this year by the economic fallout from Russia’s invasion of Ukraine, as well as the lira’s continued decline. The currency shed 44% against the dollar last year, and is down more than 27% this year.
The median estimate of 10 institutions participating in the Reuters poll was for annual inflation at 81.22% in August, with forecasts ranging between 80.50% and 82.60%.
That would make it the highest reading since August 1998, when annual inflation was 81.4% and Turkey was battling to end a decade of chronically high inflation.
On a monthly basis, inflation has slowed from earlier months and the median estimate for August was 2.00%, in a range of 1.60% and 2.80%.
Turkey’s central bank shocks with 100-pt rate cut despite soaring inflation
The median forecast for year-end inflation was 70.80%, according to the median estimate of 14 economists, with forecasts between 66.00% and 77.00%.
The year-end median was 69.5% in a Reuters poll conducted in June.
The government has said inflation will fall with its economic programme prioritising low rates to boost production and exports with the aim of achieving a current account surplus.
Last month, the central bank raised its end-2022 forecast to 60.4% from 42.8% previously and expects inflation to peak near 90% this autumn before easing.
Polls show Turks believe inflation is far higher than official data.
TUIK is scheduled to announce August inflation data at 0700 GMT on Sept. 5.
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