Turkey’s January inflation is slower than expected
ANKARA (Reuters) – Turkish January inflation data released yesterday showed a smaller-than-expected increase in consumer prices and a decline in producer prices, putting Turkey firmly on track to meet its 2005 official target. Analysts said the strong lira was helping to maintain downward pressure on prices but said they did not expect any immediate interest rate cuts. The consumer price index (CPI) rose 0.55 percent month-on-month in January for an annual rise of 9.23 percent, the State Statistics Institute said. A Reuters poll of 21 analysts had forecast a CPI rise in January of 0.90 percent. The January producer price index (PPI), being announced for the first time in place of the wholesale price index (WPI), fell 0.41 percent from a month earlier. It rose 10.70 percent year-on-year. «The result is positive, as January monthly inflation falls below the January 2004 outcome of 0.7 percent month-on-month, suggesting that deflationary dynamics are in place,» said emerging market analysts. The government has set an 8 percent inflation target for 2005 under its loan accord with the International Monetary Fund. Reining in chronic inflation is a cornerstone of that pact. In December, CPI rose 0.45 percent month-on-month, giving a 9.32 percent year-on-year increase. Farm sector prices rose 0.97 percent month-on-month in January. Manufacturing industry prices slipped 1.06 percent. This month the government revised its basket of goods in calculating the figures in order to reflect changing consumption patterns. It is calculated with 2003 as the base year instead of 1994, and with a new method. «These figures are consistent with year-end targets and do not create any problem,» said Olgay Buyukkayali of Citigroup. «We do not expect the central bank to carry out an interest rate cut in the wake of these figures. We think there will be a rate cut in March.» Turkey’s central bank last cut rates on Jan. 11, shaving its overnight borrowing rate to 17 percent from 18 percent and its overnight lending rate to 21 percent from 22 percent. The move followed news that Turkish inflation had fallen to its lowest level in nearly 30 years in 2004, with consumer inflation dropping to 9.32 percent compared with a government projection of 10 percent. Ahmet Akarli, an economist at HSBC, said the January inflation figures showed fears of seasonal price increases in the early months of 2005 had been overdone. «This fall is not surprising in an environment where the lira is appreciating,» he said.
