Turk inflation at below 10 pct
ANKARA – Turkey’s annual consumer price inflation dipped back below 10 percent in May, helped by a seasonal fall in food prices, data showed yesterday. Turkey targets 4 percent inflation for end-2007, but the annual rate has consistently hovered at more than twice that level and had been above the 10 percent mark since January. Consumer price inflation (CPI) came in at a lower-than-forecast 0.50 percent month-on-month in May, giving a year-on-year increase of 9.23 percent, the Turkish Statistics Institute (TUIK) said. Annual CPI stood at 10.72 percent in April. The producer price index (PPI) rose 0.39 percent on the month and 7.14 percent annually, down from 9.68 percent in April. «It seems that food prices surprised on the downside… This is an encouraging development and in line with our overall assessment of inflation dynamics,» Morgan Stanley economist Serhan Cevik said. He added he expected inflation to keep declining in the coming months as base effects and the lira’s strength remain favorable. The data showed food and non-alcoholic beverages’ prices fell by 1.66 percent in May from the previous month. Clothing and shoes showed the biggest rise in the month at 11.35 percent. «It was as the central bank said: It said inflation would fall because of food. This is important from the point of view of the central bank’s credibility,» said JP Morgan economist Yarkin Cebeci. The central bank governor, Durmus Yilmaz, said last week the bank faced a credibility gap because inflation remained far ahead of year-end targets as of the end of last month. A Reuters poll had given a median inflation forecast of 0.9 percent for consumer prices and 0.61 percent for producer prices. The lira strengthened after the data. It stood at 1.3110 against the dollar on the interbank market in after-hours trade, against 1.3140 just before the release of the figures. Turkey’s central bank raised the key overnight borrowing rate by 425 basis points last year after a rise in inflation triggered capital flight and a 25 percent slide in the value of the lira. It has kept rates on hold since last July. But despite yesterday’s data, the central bank is expected to remain cautious over interest rate cuts as Turkey heads for elections next month amid political tensions. «Given the fact that inflation is still well above the central bank’s target and political uncertainties, the central bank of Turkey will (keep rates) on hold this year,» Cevik said. Last year, May CPI rose 1.88 percent and PPI jumped 2.77 percent. The CPI rose a higher-than-expected 1.21 percent in April 2007. According to the latest central bank survey of economists and business leaders, annual CPI inflation is expected to end this year at 7.84 percent. Last year’s figures came out around double the 5 percent target.
