ECONOMY

Turkish annual inflation falls to multiyear low

ANKARA (Reuters) – Turkey’s consumer price index (CPI) fell more than expected month-on-month in July, hitting a multiyear low and bolstering expectations of an interest rate cut. The Turkish Statistics Institute said on Friday consumer price inflation fell 0.73 percent month-on-month to give an annual rise of 6.90 percent, compared to a forecast in a Reuters poll of a 0.2 percent fall. The institute’s webpage showed that was the lowest annualized figure since 1995. Inflation had been expected to fall in July due to clothing stores slashing their prices for the summer sale season. Clothing and shoes prices fell 7.71 percent from the previous month. Last month, CPI fell 0.24 percent and the producer price index (PPI) by 0.11 percent. Analysts are closely watching the inflation data to gauge when the central bank will start cutting interest rates and have forecast that it will wait for uncertainty over unprocessed food and oil prices to disappear before acting. «I expect the central bank to start cutting short-term interest rates by 25-50 basis points in October,» said Serhan Cevik, economist at Morgan Stanley. Inflation remains well above the official end-year target of 4 percent and the central bank has warned that dry weather could push up unprocessed food prices. It is widely expected to start rate cuts in the final quarter of this year. »I think the central bank clearly will see these numbers as positive and if the lira remains strong, I think the door is open for a cut in the fourth quarter. That said, much is dependent on what happens to the global financial environment,» said Lars Christensen, economist at Danske Bank.