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ISTANBUL: Turkey’s annual inflation is expected to climb near 85% in September and it was seen declining only to 72% by end-2022, a Reuters poll showed on Wednesday, after the central bank shocked markets by cutting rates twice despite rising inflation.

Inflation has surged since last autumn, when the lira slumped after the central bank gradually cut its policy rate in an easing cycle long sought by President Tayyip Erdogan.

The bank cut its policy rate again by 200 basis points to 12% in the last two months, going against a global tightening cycle despite the sustained rise in inflation, surging energy prices and the lagged effect of the lira’s decline.

The rate cuts triggered a currency crisis last year and the lira shed 44% of its value against the dollar in 2021 and has declined more than 28% this year, hitting historic lows.

Annual inflation is expected to rise to 84.63% in September, according to the median estimate of 11 economists who participated in the Reuters poll, with forecasts between 83.50% and 85.35%.

That would make it the highest reading since July 1998, when annual inflation was 85.3% and Turkey was battling to end a decade of chronically high inflation.

On a monthly basis, inflation was expected to climb 3.80% according to the median estimate, in a range of 3.10% and 4.10%.

The high monthly reading was largely due to price hikes in natural gas and electricity this month as well as the rise in food prices.

Turkish inflation seen breaching 81% in Aug, falling to 71% by end-2022

Turkish authorities raised electricity and natural gas prices by around 20% for households and by around 50% for industrial use, citing the impact of the conflict in Ukraine and global developments.

The median forecast for year-end inflation was 72.25%, according to the median estimate of 10 economists. Forecasts ranged between 70% and 77% and one person predicted 120%.

The year-end median was 70.8% in a Reuters poll conducted in August.

The year-end forecast of the central banks stands at 60.4% 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.

TUIK is scheduled to announce August inflation data at 0700 GMT on Sept. 5.

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