Turkish consumer prices flat in August
ANKARA – Turkish consumer prices were virtually flat in August, while producer price inflation exceeded forecasts, official data showed yesterday, but the figures were not expected to affect interest rate expectations. The Turkish Statistics Institute said consumer price inflation was 0.02 percent month-on-month in August, giving an annual rate of 7.39 percent. The producer price index rose 0.85 percent in the month and rose 3.72 percent year-on-year. Analysts said the central bank would want to see September inflation data before considering any interest-rate cut. Last month the bank reiterated it could begin moderate rate cuts in the fourth quarter. Analysts drew attention to the sharp rise in food prices, which were up 1.69 percent on the month, reflecting the impact of a drought over the summer. Hotel, housing and service prices also rose, but were offset by sharp falls in clothing prices. «There’s some scope for a Q4 (interest rate) cut,» said ABN AMRO economist Debbie Orgill. «But they’re going to be quite cautious, thinking some of the easing comes from reduced demand around the election.» Turkey held a general election on July 22, which resulted in a resounding victory for the ruling center-right AKP. In a Reuters poll, the median forecast was for the CPI to be unchanged month-on-month, while PPI was predicted to rise 0.42 percent. In July, consumer prices fell 0.73 percent month-on-month while producer prices rose 0.06 percent. Waiting for Ramadan Clothing and footwear prices fell 7.13 percent in the month, confirming analysts’ expectations of lower clothing prices as a result of summer sales. Telecommunications prices fell 2.92 percent. «From the rate decision point of view, I think September inflation is going to have more effect,» said Finansbank economist Inan Demir, pointing to the start of the Islamic fasting month of Ramadan in mid-September. «Because of the effect of Ramadan and of the drought on food prices and the uncertainty in global markets, I think the central bank is going to want to see September inflation too,» he said. The central bank said in minutes to its latest interest rate-setting meeting that annual consumer price inflation and food prices could rise in August, but it expected falls in crude oil and commodity prices to ease the pressure on costs. Economists in the latest Reuters poll forecast year-end consumer price inflation of 7 percent, well above an official forecast of 4 percent. The central bank’s latest external expectations survey pointed to end-2007 CPI of 7.16 percent.
