Turkish inflation has risen by 36% as a result of the lira crisis, the largest since 2002 by Reuters

ISTANBUL (Reuters) – Turkey’s year-on-year inflation rose much more than expected in December to 36.08% year-on-year since September 2002, when the figures show a decline in the value of the lira at the end of last year.

Consumer prices rose by 13.58% month-on-month, according to the Turkish Statistics Institute, according to Reuters’ 9% survey forecast. The annual inflation forecast was 30.6%.

The pound was priced at 13.6 against the dollar after the data, 3% lower per day but at the beginning of the low of 13.92. Last year it was down 44% in November and December after an upheaval.

The producer price index rose by 19.08% month-on-month in December, rising by 79.89% year-on-year in December, reflecting the rise in import prices as a result of the currency crash.

It was the highest annual CPI of 37.0% in September 2002, before President Tayyip Erdogan’s AK Party came to power in November of that year. The forecast for 13 economists was between 26.4% and 37.3%.

Consumer prices rose by 53.66% year-on-year, while food and beverage prices rose by 43.8%.

“This reflects the crazy wheel of inflation to attract demand, it is very dangerous because the central bank implied that price pressure was due to supply cuts, and that it could do nothing about it,” said Ozlem Derici Sengul, founding partner. Spinn Consulting, Istanbul.

“Rates need to rise immediately and aggressively,” he said. “Annual inflation is likely to reach 40-50% by March.”

Inflation has been hovering around 20% in recent months, driven by lows falling to historic lows after central banks cut their policy rate by 500 points since September, under pressure from Erdogan.

The central bank said that the temporary factors were that prices were rising and that inflation was expected to continue on a volatile path in the short term.

The pound was 18.4 against the dollar in December, before rebounding sharply last week, following state-sponsored market interventions and Erdogan announcing a scheme to protect pound deposits from currency volatility.

Inflation has been mostly double-digit and has been above par with rising markets for most of the past five years, eating up Turkish profits and gaining public support from Erdogan.

The central bank forecast year-end inflation for 18.4% in a report released in late October.