ECONOMY

Turkish inflation rises

ANKARA – Turkish inflation came in sharply higher than expected in April due to high oil and agriculture prices, official data showed yesterday, reducing expectations of a near-term interest rate cut. The Turkey Statistics Institute (TUIK) said the consumer price index (CPI) rose 1.34 percent month-on-month in April for an annual rise of 8.83 percent, compared with a forecast of 0.45 percent monthly inflation in a Reuters poll. The producer price index (PPI) in April was up 1.94 percent month-on-month and 4.96 percent year-on-year. According to the median forecast in a Reuters poll of 21 economists, the PPI was expected to be 0.63 percent higher. «It makes last week’s rate cut look strange… I doubt we’ll get anything (a rate cut) in the second quarter now. They’re not going to get to their 5 percent target,» said ABN AMRO economist Debbie Orgill. «All the core measures rose. Mainly it’s services again so it’s the same old problem; services sector inflation remains pretty rigid.» The Turkish central bank lowered key interest rates by 25 basis points last week in line with expectations and economists subsequently forecast that the bank would cut rates by some 1.5 percentage points in the remainder of this year. In its quarterly inflation report last Friday, it said there were risks to Turkey meeting its 5 percent consumer price inflation target for this year and that the bank was ready to respond if oil prices pushed inflation higher. No cuts «Net-net (the above) figures suggest much less scope for rate cuts this year, a more difficult macro picture emerging… grist to the mill of those arguing for early elections in Turkey, while the macro is still reasonably positive,» said Bear Stearns International’s Tim Ash. Turkish elections are scheduled for next year. Alcoholic beverages and tobacco products came at the top of price hikes with 31.20 percent year-on-year in April. House prices rose 10.57 percent for the same period. «The mixed service price picture after a March improvement adds to an already gloomy oil price outlook. But the key contribution here is clothing,» said 4cast analyst Francesca Beausang-Hunter. However, she said seasonal factors seemed to have played a part in the rise in clothing prices, «hence pointing to normalization ahead.» The lira currency eased to 1.3215 against the dollar in after-hours trading, after closing at 1.3160 on the interbank market. The Turkish central bank launched inflation targeting at the start of 2006 and is targeting a 5 percent rate for this year. Turkey has lowered its inflation to single-digit levels for the first time in a generation under the country’s previous $19 billion standby deal, which expired last year and was replaced by a fresh $10 billion standby.