Duvar English - Reuters
Turkey's lira underperformed on Nov. 3 as annual inflation neared 20%, widening the gap with the policy rate, and emerging market stocks extended losses to a seventh straight session in anticipation of tapering news from the U.S. Federal Reserve.
Annual inflation in Turkey was 19.89% in October - the highest in nearly 2-1/2 years, rising from 19.58% in September. The policy rate at 16% is already well below inflation as the central bank cut by 300 basis points this year, pressured by Turkish President Recep Tayyip Erdoğan.
Core inflation, which strips out energy, food and some other goods, eased to 16.82% from near 17% a month earlier.
The lira fell by as much as 0.8%, but cut some losses as the number was below estimates of 20.4%. It was last trading down 0.2% at 9.627 per dollar. The currency is down almost 23% this year largely because of uncertain and unconventional monetary policy.
"The small drop in core inflation and political pressure on the central bank means that further interest rate cuts lie in store," said Jason Tuvey, senior EM economist at Capital Economics.
"We have penciled in 100bp reduction in the one-week repo rate at this month's meeting," and further aggressive easing ahead, he said.