Turkey's Annual Inflation Soars to Three-year High above 21%

Data on Friday showed that Turkey's annual inflation jumped more-than-expected to a three-year high of 21.31% in November, further exposing the risks of recent aggressive rate cuts that led to a historic drop in the lira.

The central bank, under pressure from President Recep Tayyip Erdogan, has cut the interest rate to 15% from 19% since September, leaving Turkey's real yields extremely negative, a red flag for investors and savers.

The Turkish Statistical Institute said the consumer price index rose 3.51% month-on-month, compared to a Reuters poll forecast of 3% and an annual forecast of 20.7%.

The Producer Price Index was up 9.99% from the previous month and 54.62% year over year. That suggests that currency depreciation is fueling import prices and will drive aggregate inflation in the coming months when economists see annual CPI close to 30%.

Meantime, the lira fell 0.7% to 13.765 against the US currency. It has lost about 46% of its value against the dollar this year, including 30% in November alone.