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ISTANBUL, Aug 29 (Reuters) - Turkey's annual inflation is expected to rise to 55.9% in August and stand at 55.7% at the end of 2023, a Reuters poll showed on Tuesday, extending its climb for a second month due to the lira's continued decline and recent tax hikes.
Annual inflation began to climb in July after the tax hikes were introduced and was also stoked by the lira's sharp decline this year, at around 30% so far.
After elections in May, the central bank reversed a years-long policy of low rates that had long been favoured by President Tayyip Erdogan. It hiked rates by 1,650 basis points since June in an effort to stem inflation and made changes to macroprudential measures to support the tightening.
But inflation is expected to continue rising despite the hikes, and Governor Hafize Gaye Erkan said the bank expects inflation to peak around 60% in the second quarter of 2024 before beginning the decline.
Monthly inflation is expected to stand at 7.00% in August, putting annual inflation at 55.90%, the median estimates of eight economists in the Reuters poll showed.
The monthly forecasts ranged between 5.30% and 8.40%, while annual forecasts were between 53.40% and 57.90%.
Inflation began to surge in late-2021 after the central bank embarked on an easing cycle that Erdogan had called for in a push to provide stimulus to promote growth and exports.
It touched a 24-year high of 85.5% in October 2022 after the cuts sparked a currency crisis, sending the lira down 44% in 2021 in addition to another 30% in 2022.
Erdogan changed policies after winning the presidential election, leading to the rate hikes and helping the central bank build back its international reserves, which it had used in previous years to support the lira.
As Ankara began rolling back some measures it had taken in recent years, it also introduced sharp tax hikes to support the Treasury's coffers, which were partly depleted due to fiscal stimulus in the run-up to the election.
Annual inflation is seen at 55.70% at the end of 2023, according to the median estimate of 13 economists in the Reuters poll. Forecasts ranged between 45.00% and 69.00%.
The Turkish Statistical Institute will release August inflation at 0700 GMT on Sept. 4.
(Reporting by Ezgi Erkoyun Writing by Ali Kucukgocmen Editing by Peter Graff)
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