Turk inflation beats target

ANKARA – Turkish inflation figures came in at their lowest in nearly 30 years in 2004, with annual consumer price inflation beating a government projection of 10 percent, official data showed yesterday. The State Statistics Institute said Turkey’s consumer price index (CPI) rose 0.45 percent month-on-month in December for an annual rise of 9.32 percent. The December wholesale price index (WPI) was 0.13 percent higher than a month earlier, giving a 13.84 percent year-on-year increase. «When Turkey last had single-digit annual inflation, I was a university student,» State Minister Besir Atalay told a news conference. He said the government revised its basket of goods selected for consumer and producer price indices in order to reflect changing patterns in consumption. The updated baskets will take affect in 2005. «This is the lowest CPI figure we have had since the end of 1975,» said a central bank official. According to the median forecasts in a Reuters poll, the month-on-month CPI was expected to rise 1.05 percent and WPI was seen as rising 0.68 percent. «(The data) leaves prospects good for meeting the 8 percent year-on-year target in 2005. This result should play supportively for the bond market and could potentially knock another 20 basis points off yields,» said 4CAST analyst David Ross. The government had said it expected inflation to come in at 10 percent for end-2004 inflation, compared with an initial IMF-backed official target of 12 percent. Overall manufacturing industry prices were unchanged in December from a month earlier, with state sector prices down 0.3 percent and private sector prices up 0.2 percent. Agricultural sector prices rose 1.6 percent in December. In the same month last year, the CPI rose 0.9 percent and the WPI climbed 0.6 percent month-on-month. «It seems that the strong lira played a role,» said Yatirim Finansman’s Umit Sener, adding lower world crude prices slashed production costs. If the exchange rates continue to fall, then expectations of a rise in inflation will disappear, he added. Moderation in food and rent prices contributed to the slowing in CPI, said Ross, adding slow manufacturing price increases benefited wholesale prices. The data for 2004 is very positive and the 2005 target could also be achieved if Turkey does not suffer any major external shock and sticks to fiscal austerity, said another analyst. Official inflation targets for 2005 and 2006 are 8 percent and 5 percent respectively.