ECONOMY

Inflation target likely to be met, Turkey’s central bank announces

ANKARA (Reuters) – Turkey’s central bank announced yesterday that it was extremely confident it would meet inflation targets under a $16-billion IMF loan deal ahead of November 3 elections, although global oil prices remained a future risk. Turkey has promised to bring consumer inflation (CPI) down to 35 percent by the end of the year. Annual CPI inflation was 40.2 percent in August, helped by a persistent domestic slowdown after a 2001 economic crisis. «The probability that the year-end inflation target will be met is extremely high,» the central bank said in a statement. The bank has been steadily guiding its key lending rates lower as inflation falls, but there was no mention of a rate cut in yesterday’s statement. Most analysts think the bank will not cut rates until the uncertainty surrounding the election is resolved. Despite this good news, Turkey’s lira fell, debt yields rose through the 70-percent mark and shares slid more than 2 percent as a procedural milestone for November elections nears. Yields on the May 7 bills, the busiest on the secondary market, edged up to 70.98 percent from Friday’s 69.82 percent, while the main share index fell 2.5 percent to 9,412.16 points. The lira fell to 1,639,000 to the dollar from Friday’s figure of 1,620,000. It has not seen levels around 1,640,000 since late August. Traders said a deadline tomorrow for finalizing party candidate lists for the November 3 election was a source of worry. Sitting deputies who think they are too low on the list to be sure of re-election may band together to postpone elections. «The stories that an Iraq operation is getting near, the candidates lists on September 11 and the possibility that elections will be delayed are keeping trade in a narrow band and volumes low,» said Alper Tavukcu of Hak Securities. Markets also fear a possible US offensive against neighboring Iraq for its alleged development of weapons of mass destruction could undermine Turkey’s economic recovery, backed by $16 billion in IMF loans. A legal challenge by nationalists to reform laws central to Turkey’s hopes of eventual EU membership had also driven some selling in stocks, traders said. The bond market was particularly focused on elections, which investors see as a way out of political stalemate. «After touching 72 percent in the morning, yields came back a bit and traded flat. They are rising because of tension peculiar to this week. The demand for foreign exchange was important but I don’t think it will go any further,» said one debt trader, who asked not to be named. Forex traders also felt yesterday’s slide was not likely to continue. «We’ve heard about one foreign bank buying on the forward market, but sales came in at 1,640,000,» said a dealer. – In the Atlantic, AP Moller has fixed M/V «Kingston Trader,» 74,242 dwt, built 1999, delivery S. Africa end Sept., redelivery W. Coast Italy, at USD 6,250 daily.