Annual inflation in Turkey slows to 3-year-low

ANKARA

HÜRRİYET photo

Turkey’s annual inflation slowed in April to its lowest level since May 2013, as hikes in food prices lost pace.

The consumer inflation rate dropped to 6.57 percent from 7.46 percent, data from the Turkish Statistics Institute (TÜİK) showed on May 3. Consumer prices in April rose 0.78 percent from the previous month, significantly below forecasts, according to the TÜİK data. 

An ongoing decreasing trend in food prices played a significant role in a long-awaited drop in annual inflation, according to analysts. 

Food inflation declined to 1.38 percent in April on a yearly basis from around 11 percent in January, according to TÜİK data. 

“A 1.48 percent of decline in food prices played a leading role in contracting the inflation rate on monthly basis. We believe that the ongoing Russian sanctions and good weather conditions enabled the food prices to drop. The food group slashed the headline inflation by 0.3 points,” said İş Investment economist Muammer Kömürcüoğlu, as quoted by Reuters. 

“As the food group is not included in calculations of core inflation, we have seen a limited decline in the core inflation. The slight improvement in the core inflation indicators have showed us the recovery in the inflation rate may be temporary and the Central Bank should maintain its strong monetary tightening,” he noted, adding that annual inflation would likely increase in the coming months. 


Highest annual increase in alcoholic beverages, tobacco

The highest monthly increase was seen in clothing and footwear by 12.60 percent in April, according to official data.  The indices rose for education by 0.87 percent, for recreation and culture by 0.76 percent, for furnishings and household equipment by 0.7 percent and for transportation by 0.62 percent. The only monthly decrease was seen in food and non-alcoholic beverages at 1.48 percent.  

The highest annual increase was seen in alcoholic beverages and tobacco, by 12.84 percent, according to the TÜİK data. Hotels, cafes and restaurants with 11.35 percent, miscellaneous goods and services with 11.25 percent, furnishings and household equipment with 10.38 percent and health with 9.58 percent were the other main groups which saw high annual increases in prices. 

New Turkish Central Bank Governor Murat Çetinkaya took a cautious stance on the outlook for inflation on April 26, saying price stability would be his priority, and signaling his ambition for simpler and more transparent policy. In the launch of the country’s second inflation report on April 26, Çetinkaya said he aimed for a simplification of the bank’s complex monetary policy at a “reasonable pace,” saying that would mean a narrower rate corridor and a single-rate policy.

Announcing the bank’s quarterly inflation report, Çetinkaya also stuck to a mid-point inflation forecast of 6 percent for the end of 2017. He forecast inflation would stabilize at 5 percent in 2018.