Turkey’s central bank vows action as inflation surges to 18 percent

Turkey‘s central bank said it would adjust its monetary stance given “significant risks” to price stability, a move it hope will calm financial markets after inflation surged to its highest in nearly a decade and a half.

The comments from the central bank on Monday underscore the volatile outlook for prices amid a currency crisis. 

The lira has lost 40 per cent of its value against the dollar this year, driving up the cost of goods from potatoes to petrol and sparking alarm about the impact on the wider economy and the banking system.

Inflation jumped 17.9 per cent year-on-year in August, official data showed, outstripping market expectations and marking its highest level since late 2003.

Recent developments regarding the inflation outlook indicate significant risks to price stability. The central bank will take the necessary actions to support price stability,” the bank said in a statement.

(The) monetary stance will be adjusted at the September monetary policy committee meeting in view of the latest developments.

President Tayyip Erdogan, a self-described “enemy of interest rates”, wants to see lower borrowing costs to keep credit-fuelled growth on track. Investors, who fear the economy is set for a hard landing, want big rate hikes.

Finance Minister Berat Albayrak told Reuters in an interview on Sunday that the bank was independent of the government and would take all necessary steps to combat inflation. He also promised a “full-fledged fight” against inflation.