By Ezgi Erkoyun
ISTANBUL (Reuters) – Turkey’s inflation is expected to rise above 11% in December due to waning so-called base effects that pushed it to multi-year lows in October, even while it closes a volatile year below a forecasted level of 12%, a Reuters poll showed on Friday.
Inflation surged to a 15-year high above 25% in October of last year in the wake of a currency crisis. Since then, the combination of central bank rate hikes, weak domestic demand and base effects have helped bring prices down.
Annual inflation had slowed to 8.55% by October this year, and rebounded a bit in November to 10.56%.
The median estimate in the Reuters poll of 13 economists stood at 11.56% for annual inflation in December. Estimates ranged between 11.23% and 11.9%.
The Turkish government has forecast inflation at 12% at the end of this year, and sees it falling to 8.5% by end-2020.
Month-on-month inflation was expected to stand at 0.49%, with forecasts between 0.20% and 0.79%.
The expected rise in December inflation is due to the weakening of the Turkish lira and rise in brent oil prices, said Erol Gurcan, economist at Gedik Yatirim.
“The base effect from last year had supported inflation until October but we see its negative impact in November and December,” said Gurcan, who expects the central bank to cut benchmark rate by up to 150 more points in coming months.
Turkey’s central bank, which sets its policy to yield what it says is a “reasonable” real interest rate, has cut its key rate by 12 percentage points this year to boost economic activity as inflation declined. The benchmark one-week repo rate currently stands at 12%.
Turkey’s Statistics Institute is expected to announce December inflation data at 0700 GMT on Jan. 3.
(Reporting by Ezgi Erkoyun; Editing by Jonathan Spicer)