Turks beat IMF target
ANKARA (Reuters) – Turkey beat its 2005 IMF-backed inflation target of 8 percent, official data showed yesterday, but economists said the central bank was likely to hold steady on interest rates after cutting them nine times last year. The Turkey Statistics Institute (TUIK) said the consumer price index (CPI) rose 0.42 percent month-on-month in December for an annual rise of 7.72 percent. The producer price index (PPI) in December was down 0.04 percent from November, or just 2.66 percent higher annually. «The figures are positive. They show the seasonal factors of October and November have now passed and the figures are also below the target, which will have a positive psychological impact,» said Finans Investment economist Volkan Kurt. In a poll of 17 banks and brokerages, economists’ median forecast was for a month-on-month rise of 0.60 percent in the CPI and a 0.40 percent rise in the PPI. Yesterday’s data showed manufacturing industry prices declined by 0.58 percent year-on-year in December, while farm prices rose by 1.72 percent. Economists had said that easing world oil prices could help exert downward pressure on inflation in Turkey, which imports most of its energy from its oil-rich neighbors. Turkey, which began European Union accession talks in October, has rebounded strongly from a 2001 financial crisis. Inflation is in single figures for the first time in 30 years and consumer confidence is back. But the IMF, with which Turkey has a $10 billion loan program, has said the pace of interest rate cuts is likely to be slower this year. Rates declined by 450 basis points during 2005. «The central bank cut interest rates many times in 2005 and now it can wait for a while. We see no short-term risks in inflation but I am not very hopeful of a rate cut in January,» said Finans Investment’s Kurt. Echoing that comment, Caroline Gorman of 4Cast said: «We do not expect these numbers to change market expectations. The central bank is likely to keep rates on hold in the short term, given strong domestic demand, still high services inflation, and continuing uncertainty over the oil price outlook.» In November, CPI increased 1.4 percent and PPI fell 0.95 percent month on month. On December 9, the central bank trimmed its key interest rates by 25 basis points, bringing its overnight borrowing rate to 13.50 percent and its lending rate to 17.50 percent. The bank said it expected to meet its 2006 inflation target of 5 percent «if conditions are right.»
