* Interest rate highs beginning to cool prices
* November gains led by housing
* Transportation, clothing prices down
* Prices seen peaking in May
ISTANBUL, Dec 4 (Reuters) - Turkey's annual inflation rate edged up to 61.98% in November, data showed on Monday, its highest level this year but just shy of expectations, signalling that an aggressive rate-hiking cycle may be beginning to cool demand.
Month-on-month, consumer price inflation (CPI) was 3.28%, according to the Turkish Statistical Institute, less than a forecast of 3.9% in a Reuters poll.
Annual inflation was expected to have risen to 63% in November before ending the year at 67%, the poll showed. Price rises are seen peaking in May between 70-75% before dipping due to the monetary tightening cycle that is winding down.
The data "adds to evidence that inflation pressures in the economy continue to cool," said Liam Peach, senior emerging markets economist at Capital Economics.
The "monetary tightening cycle is likely to come to an end with one final interest rate hike...later this month," he wrote.
In October, annual inflation dipped for the first time in three months to 61.36%.
Inflation soared after a currency crisis at the end of 2021 and touched a 24-year peak of 85.51% in October last year. This year, the lira has so far lost some 35% of its value, compounding the cost-of-living crisis for Turks.
Monthly CPI was driven by an 11% jump in housing-related costs in November, while clothing and transportation costs were nearly flat, the data showed.
Concern autos will become less affordable due to rising prices and the ongoing lira depreciation has driven sales to an annual record, up 60.8% in the January-November period, trade association data showed on Monday.
The domestic producer price index was up 2.81% month-on-month in November for an annual rise of 42.25%.
The latest run-up in inflation began in July on the back of tax hikes and a sharp decline in the lira following May elections.
Since June, the central bank has reversed a years-long policy of low rates that had long been favoured by President Tayyip Erdogan. It has hiked rates by 3,150 basis points to stem inflation and also adjusted a raft of credit rules.
As part of Erdogan's pre-election pledges, household monthly natural gas consumption up to 25 cubic metres was provided free until May next year.
The lira weakened 44% against the dollar in 2021 and another 30% in 2022. Inflation fell to as low as 38.2% earlier this year, partly due to base effects and a relatively stable lira.
The central bank raised its benchmark rate to 40% last month and said tightening will be completed in a short period of time.
The bank said domestic demand appears to be moderating however its existing high level, along with stickiness in services prices, and geopolitical risks keep inflation pressures alive.
(Reporting by Canan Sevgili and Zeynep Berkem; Writing by Daren Butler; Editing by Jonathan Spicer and Sharon Singleton)
