(Bloomberg) -- Turkey’s annual inflation probably swung to a 15-month high, an acceleration closely watched by a central bank that’s still on alert after ending interest-rate hikes.

This year’s steep minimum wage hike is combining with higher food prices to drive up cost pressures for an economy long scarred by inflation. Despite a more stable lira, Turkey is on track to end 2024 with the world’s fifth-fastest rate of inflation, according to the International Monetary Fund, an outlook that assumes a deceleration will set in from mid-year.

With the central bank adopting a wait-and-see approach for now, data due Monday will show price increases accelerated for a fourth straight month and reached 66% in February, according to the median estimate of economists in a Bloomberg survey. The central bank expects inflation to finish the year at 36%.

But the attention of policymakers is focusing more on monthly inflation, which started the year with a sharp rise on the back of wage and tax increases. The gauge is forecast to ease back in February to 4% from 6.7% in January, though it remains well above its level in the fourth quarter.

The figures will be the final reading before local elections later in March, a ballot in which President Recep Tayyip Erdogan’s ruling party will try to win back opposition-held cities such as Istanbul and Ankara. Looser fiscal policy ahead of the vote has emerged as an obstacle to efforts by the central bank to contain inflation.

What Bloomberg Economics Says..

“Turkey’s inflation problem is getting worse, even as the central bank’s aggressive policy tightening has reached its terminal rate. We see the central bank on hold until the last quarter of the year, but upside risks to inflation keep the possibility of additional hikes alive.”

—Selva Bahar Baziki. Click here to read more.

Newly installed Governor Fatih Karahan, who took over after a surprise leadership change in early February, has called the minimum wage increase the biggest risk to Turkey’s inflation outlook.

Policymakers expect annual inflation to peak above 70% in May but left rates unchanged last month, after delivering a cumulative 3,650 basis points of tightening in eight steps. For the first time, the central bank mentioned in February that it deems real lira appreciation a key element of disinflation.

The minutes of the last policy meeting also singled out the “strong increase in unprocessed food prices” as a major driver of price growth. The fresh batch of data will likely deepen that concern.

The cost of food, which accounts for about a quarter of Turkey’s inflation basket, probably rose by 8.5% in February from January, according to QNB Finansbank, more than double its estimate of overall monthly inflation. 

“There has been a significant increase in vegetable prices in particular,” the bank’s economists including Erkin Isik said in a note. “Prices in the food group in general have increased at high rates.”

--With assistance from Joel Rinneby.

(Updates with comment from central bank minutes in eighth paragraph.)

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