ECONOMY

Turkish inflation lower

ANKARA (Reuters) – Turkish prices saw their lowest annual rise for nearly 30 years in February, and analysts said yesterday’s data showed the country was on track to meet its year-end IMF-backed inflation targets. Financial markets may now focus on a possible central bank interest rate cut, analysts added. Consumer prices rose 0.55 percent month-on-month in February for an annual rate of 14.28 percent, while wholesale prices climbed a monthly 1.64 percent and 9.14 percent year-on-year, the State Statistics Institute said. It was the lowest annual rise in the wholesale price index (WPI) since March 1976, and the lowest for the consumer price index (CPI) since January 1977. Reining in chronically high inflation is a cornerstone of Turkey’s $19 billion loan accord with the International Monetary Fund, signed after a 2001 financial crisis unleashed escalating prices, a currency float and the worst recession in decades. «The year-end target is now well within reach,» said Yarkin Cebeci, senior economist at JPMorgan in Istanbul. Under the IMF pact, Turkey targets year-end annual inflation of 12 percent for both consumer and wholesale prices. According to a Reuters poll, the average rise forecast was 1.5 percent for the WPI and 1.1 percent for the CPI. Markets will now watch for signs of a second interest rate cut this year, analysts said. The central bank last cut overnight rates by two percentage points on February 5 after the release of January data showed the CPI rose 0.7 percent and WPI was up 2.6 percent. «With the government appearing to make progress in negotiations with the IMF… everything is pointing to a near-term rate cut,» Tim Ash, analyst at Bear Stearns in London, said in a research note. An IMF team is currently in Turkey to review the country’s progress on pledges it has made in return for a latest loan tranche worth some $500 million. Core inflation, or price rises in the manufacturing sector, rose just 0.4 percent in February. It had been expected to rise 0.6 percent. Inflation beat IMF-backed targets at the end of 2003, with CPI at 18.4 percent and WPI at 13.9 percent.