Official data showed that the annual inflation rate of consumer prices in Turkey rose to 61.98% last November, driven by the rise in food and transport prices, slightly below expectations, according to data from the Turkish Statistical Institute released today, indicating that inflation increased 3.28% on a monthly basis.
A Reuters survey forecast annual inflation would jump to 63 percent in November, concluding the year at 67 percent. The previous October, annual inflation declined for the first time in three months to 61.36%.
Inflation soared following the lira crisis at the end of 2021, reached a 24-year high of 85.51% in October last year.
This year, the lira has lost nearly 35 percent of its value. The report indicated that the domestic producer price index climbed by 2.81% month-on-month in November, reflecting an annual rise of 42.25%.
Interest Rate Raise
The Turkish central bank declared at the end of the previous month that it would be raising interest rates by 500 basis points to 40% in the sixth month of the monetary tightening cycle. The raise coincides with his stepping up attempts to combat inflation and boost the value of the lira, which is depreciating.
In a statement at the time, the bank emphasized how the strengthening of external financing conditions, the ongoing increase in reserves, and the rise in both domestic and foreign demand for Turkish lira assets all significantly support monetary policy effectiveness and exchange rate stability, sending a strong signal that the bank is almost done raising interest rates to the point where inflation is beginning to decline.
Last Thursday, S&P Ratings said that it has improved its outlook for Turkey’s credit rating from stable to positive.
The agency stated in a statement that it confirmed Turkey’s credit rating at “B”, with a focus on a minimal double deficit.
S&P said the adjustment comes after recent policy adjustments including the central bank’s main interest rate rise to 40 percent, in addition to the current account surplus reported in September, and the recovery of useable reserves during the first 17 days of November.
The ‘B’ rating is five points below than investment grade. A optimistic outlook suggests that the rating can be improved, but it is not bound to a deadline.
Turkey’s central bank’s overall reserves grew in November to $136.5 billion, the highest amount on record.
The S&P statement anticipated that the Turkish economy would rise by 3.7% this year, and 2.4% in 2024.