Turkey's inflation accelerates closer to 70% with rates at peak

“We are far away from price stability, but that’s our goal” Turkey’s Treasury and Finance Minister Mehmet Simsek said in a TV interview with Bloomberg HT before the data release.

The figures were the final reading before local elections later in March, a ballot in which President Recep Tayyip Erdogan’s ruling party will try to win back opposition-held cities such as Istanbul and Ankara. Looser fiscal policy ahead of the vote has emerged as an obstacle to efforts by the central bank to contain inflation.

Newly installed Governor Fatih Karahan, who took over after a surprise leadership change in early February, has called the minimum wage increase the biggest risk to Turkey’s inflation outlook.

Policymakers expect annual inflation to peak above 70% in May but left rates unchanged last month, after delivering a cumulative 3,650 basis points of tightening in eight steps. For the first time, the central bank mentioned in February that it deems real lira appreciation a key element of disinflation.

The minutes of the last policy meeting also singled out the “strong increase in unprocessed food prices” as a major driver of price growth.