ANKARA: Turkey's year-end inflation rate increased to 7.4 percent in December, official statistics showed on Friday, as the effects of a plunging lire began to take effect on household prices.

The rate was considerably higher that central bank forecast of 6.8 percent for 2013 and came a day after the Turkish currency touched a new low against the dollar.

Analysts had warned that inflation targets were in danger by the plunging lira put under pressure by a corruption scandal roiling the pro-business government.

"We think the depreciation pressure on the Turkish lira is to continue going forward, as heightened political tension adds to the already ... negative picture," Finansbank economist Gokce Celik said in a statement.

But on Tuesday Deputy Prime Minister Ali Babacan said risks stemming from the political turmoil were only temporary even after a spokesman said the crisis had cost the economy $100 billion.

The central bank is trying to shore up the lira by selling off some of its dollar reserves. Turkey's economy and the lira were already weakened by the money tightening of the US central bank.

The lira was being quoted 2.1732 on Friday afternoon against the US dollar, after touching a new low of 2.18 on Thursday.

The lira fell to 2.1778 to the dollar while the main Istanbul stock exchange index lost 1.91 percent to 66,503.69 points.

The lira's continuing fall is despite the central bank's decision last week to sell off some of its dollar reserves in order to shore up the currency, also hit by the scaling down of the US monetary stimulus policy.

The central bank plans to inject $450 million daily until the end of January.

Babacan said on Thursday that the impact of the political crisis was temporary.

"It is a temporary situation. It is to do with the political perception," Babacan told a business conference in Ankara.

He had said on Tuesday that government's economic growth forecast for 2014 remained at four percent despite the turmoil.

A series of tax hikes on cars, cigarettes, and mobile phones came into effect in Turkey on Wednesday.