Consumer prices increased by 1.72% m/m in January, the statistics institute (TUIK) said on Monday. The markets had expected a rise of 1.6% m/m.

Food prices jumped 5.16% m/m and alcoholic beverages & tobacco prices rose 2.72% m/m, reflecting the tax hikes on alcohol & tobacco products. Clothing prices were down 7.59% m/m partially offsetting the significant increases in food and alcoholic beverages & tobacco prices. Transport prices were up 2.5% m/m as a result of the rising costs stemming the depreciation of TRY. Looking at the details of January data, beer prices rose 8.73% m/m, gasoline increased 7.35% m/m, diesel was up 2.88% m/m.

The annual inflation rate accelerated to 7.48% in January from 7.40% in December.

The Central Bank last month delivered aggressive rate hikes in an attempt to curb the depreciation of TRY but this had a little impact. Last week, the Bank raised its forecast for 2014 year-end inflation to 6.6% from a previous forecast of 5.3%. The official target is 5%.

The Bank says exchange rate depreciation may put additional pressure on inflation in the upcoming period, but it expects aggregate demand conditions to put downward pressure on prices. 0.3 percentage points of this revision stemmed from the upward revision of the year-end food inflation assumption, tax adjustments will add around 0.5 percentage points to year-end inflation and exchange rate developments are expected to add around 0.5 percentage points to year-end inflation, the Bank explained.

The Central Bank’s one of favourite core inflation indicators, I-index (which excludes the prices of food and non-alcoholic beverages, alcoholic beverages and tobacco products and gold) rose 0.31% m/m in January for an annualised rise of 7.59%.

Domestic producer prices index (DPPI) increased 3.32% m/m and the annual change was 10.72%, TUIK also said. This rise should be the result of rising costs fuelled by weaker TRY. This is the highest m/m increase recorded in the past six years since April 2008 when DPPI rose 4.50% m/m.

The government has taken measures to curb domestic demand, loan growth and current account deficit by increasing special consumption tax on cars, imposing limits on certain loans, credit cards. Depending on the size of engine, the special consumption tax (SCT) on passenger cars was set at between 45% and 145% (previously between 40% and 130%). As a result of the SCT hike, passenger car prices are expected to rise 3.5-4%, some carmakers have argued. The price of diesel vehicles rose 2% m/m and cars with 2,000 cc engine rose 1% m/m in January, according to TUIK data. The government also raised the SCT on cigarettes and mobile phones. The minimum tax on a packet of cigarettes was raised to TRY 3.75 from TRY 3.22, while the tax on cell phones was lifted to TRY 120 from TRY 100.