Turkey's annual inflation jumped more than expected to a three-year high of 21.31% in November, data showed on Friday, further exposing the risks of recent aggressive rate cuts that prompted a historic slide in the lira.
Under pressure from President Tayyip Erdogan, the central bank has slashed the policy interest rate to 15% from 19% since September, leaving Turkey's real yields deeply negative, a red flag for investors and savers, Reuters reported.
Month-on-month, the consumer price index (CPI) rose 3.51%, the Turkish Statistical Institute said, compared to a Reuters poll forecast of 3% and an annual forecast of 20.7%.
The producer price index rose 9.99% from a month earlier and 54.62% on the year. That suggests the currency depreciation is stoking import prices and will swell overall inflation in the months ahead when economists see annual CPI nearing 30%.
Food, restaurants and hotels pushed up the annual number, reflecting a surge in demand, while the monthly price rise was driven in part by a more than 6% jump in transportation costs, reflecting rising global energy prices.
The lira edged 0.7% lower to 13.765 to the US currency at 0810 GMT. It has lost some 46% of its value against the greenback this year, including 30% last month alone, upending people's budgets along with the surging prices.
The currency slumped to an all-time low of 14.0 to the dollar this week after Erdogan repeatedly defended the low-rate policy, which has been embraced by the government, regulators and the banks' association despite widespread criticism.
"Negative real rates, the absence of policy guidance, statements by government officials arguing for a weaker lira as part of an economic development strategy and rising inflation and inflation expectations will maintain pressure on the currency," Fitch Ratings said.
The agency revised its outlook on Turkey to "negative" from "neutral". It forecast 25% inflation by year-end and expects it will average about 20% over the next two years.
The central bank, which targets 5% inflation, says the pressure is temporary and necessary to expand credit, exports and economic growth.
But economists say the low-rates policy will backfire given high imports and foreign debt, leading to more inflation pain after five years of mostly double-digit price rises.
Polls show Turks question the credibility of the data and believe inflation is higher given price spikes in basic goods such as food, which has risen 30% on an annual basis throughout this year.
Kemal Kilicdaroglu, leader of the main opposition party CHP, said outside the Turkish Statistical Institute's headquarters that its "numbers are not reliable", and said he was barred entry to discuss the issue.
"I am calling on all my citizens: when you go to the market, when you turn on your gas, your heater, is inflation really as they claim? Is it really 3.51%?" he said.