Turkish inflation rate rises to 79.6%, lagging unofficial data by record margin

Turkey’s consumer price inflation rate edged up to 79.6 percent in July, the highest level in emerging markets and industralised economies.

Inflation accelerated from 78.6 percent in June, the Turkish Statistical Institute said on Wednesday. The official figure was lower than the average expectations of economists surveyed by Reuters and Bloomberg, who predicted a rate of just over 80 percent.

Inflation in Turkey has surged to the highest levels since the 1990s after the central bank cut interest rates late last year and refused to hike them since. Rising prices and lack of confidence in government policy has led to a sharp sell-off in the lira. Major central banks around the world have tightened monetary policy to deal with accelerating price increases.

Goldman Sachs expects official inflation in Turkey, which stood at 19 percent in July last year, just prior to the rate cuts, to peak at around 90 percent in October or November.

Most Turks are suffering a slump in their standard of living as prices surge. Many have lost confidence in official data, according to opinion polls. The difference between the official figures and the numbers provided by other sources has widened markedly in recent months.

On Monday, a business group in Istanbul reported a 99.1 percent annual increase in the cost of living in Turkey’s largest city compared with 94.2 percent in June. It was the widest margin on record between Istanbul inflation and the nationwide data. ENAG Group, made up of academics claiming to use virtually the same method and basket of goods to calculate inflation as the government, said on Wednesday that annual inflation accelerated to 176 percent.

The 19.5 percentage point difference between Istanbul inflation and official data is "striking," Hakan Kara, a former chief economist of the central bank, said on Twitter.

The lira was trading little changed at 17.95 per dollar as of 10:25 a.m. in Istanbul, shortly after the inflation data was published.

The so-called core inflation rate, which strips out volatile items such as energy and food, rose to 61.7 percent from 57.3 percent in June, the statistics institute said.

Producer price inflation in Turkey accelerated to an annual 144.6 percent from 138.3 percent.

(This story was updated with economist's comment in the seventh paragraph.)

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