November inflation rate reached a 19-month high with 9.5 percent. Economists warn that the figure signals a year end rate much higher than government estimates. The index ‘is a cold shower’, says a market analyst.

Turkish inflation increased to 9.5 percent in November from 7.7 percent a month earlier, reaching a 19-month record as economists warn of a nearly two digit yearend figure.

The hike in food and clothing prices, increase in special consumption tax on tobacco, cars and mobile phones and rise in import taxes played a major role in the unexpectedly high inflation rate.
A sharp price increase was experienced in many basic spending groups in November, according to Vakıfbank Economic Researches.

Producer prices meanwhile increased only by 0.65 percent from a month earlier, the Ankara-based statistics office said on its website yesterday.

The Central Bank’s preferred measure of core inflation jumped to 8.2 percent, the highest since June 2007.

“The central bank will argue that this is ‘just’ the result of exchange rate pass-through,” Timothy Ash, head of emerging-market research for Royal Bank of Scotland in London, said in emailed comments. “Well, yes, but that’s the result of the fact that the current account deficit had been left to get too large for too long.

The Central Bank is finally on the case, but some would argue too little, too late.”
Consumer price inflation is now more than double the four-decade low of 4 percent reached in March.
Yields on two-year bonds increased eight basis points to 10.36 percent at 11 a.m. in Istanbul, rising for the first day in four.

“The fact that the core numbers keep on ticking higher while the economy slows is a worrisome issue and will force the Central Bank to keep even closer to their tightening bias,” Özhan Antero Atilla, an emerging-market analyst at Danske Bank in Copenhagen, said in emailed comments.
Turkey is revising its inflation estimate for this year to nearly 10 percent in a draft accession document for its European Union membership bid, said two government officials who declined to be identified, according to Bloomberg News.

The figure was increased from a previous estimate of 7.8 percent in the country’s three-year economic plan, the agency quoted the officials in Ankara yesterday. The estimates, which are included in a document to be presented by the government to the EU Dec. 15, will be approved by the cabinet and may change, they said.

The budget deficit for 2011 is estimated at 1.4 percent of economic output compared with a previous prediction of 1.7 percent, according to the draft, the officials said.
EFG Istanbul chief economist Haluk Bürümcekçi told Reuters that the increase in food and clothing prices has caused an unforeseen rise in core inflation. “As a result, the yearend inflation will stand at somewhere between 9.5 percent and 10 [percent].”

Ekspres Invest chief economist Nilüfer Sezgin agreed with Bürümcekçi’s forecast, adding that the inflation might go downward again next year.

“November CPI is a cold shower for Central Bank,” said Cristian Maggio, the senior emerging markets strategist at TD Rates & FX Research, in a note to investors. “…the Central Bank will have a hard time convincing the market that they are implementing a proper strategy while inflation rises, interest rates are commonly perceived as still too lax and there is no official guideline from the Monetary Policy Committee to tighten the monetary policy over the foreseeable future.”

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