Minister Albayrak upbeat on inflation outlook

ANKARA

Turkish Treasury and Finance Minister Berat Albayrak has welcomed the latest consumer price data, saying that inflation will decline to single-digits in the period ahead.

“The decline in inflation continues. With the June data, inflation numbers came in below our annual target,” Albayrak said on Twitter.

Structural measures by the government will help to maintain improvements made on the food inflation front, the minister said.

“We will first see single-digits and we will end this year with an inflation rate below our targets,” Albayrak said.

As laid out in the government’s new economic program announced last September, this year country’s inflation rate target is 15.9 percent, followed by 9.8 percent next year and 6 percent in 2021.     

According to an inflation report by Turkey’s Central Bank released in April, year-end annual inflation is expected to hit 14.6 percent in 2019.     

The latest data from the Turkish Statistics Institute (TÜİK) showed on July 3 that the country’s annual inflation rate sharply dropped to 15.72 percent in June from 18.71 percent in the previous month.

June’s inflation was the lowest seen in Turkey since June of last year, when it stood at 15.39 percent.

Over the last decade, annual inflation saw its lowest level at 3.99 percent in March 2011, while it peaked at 25.24 percent in October 2018.     

In the month, consumer prices rose only 0.03 percent from May which was less than the market consensus forecast for a 0.08 percent increase.

Food prices declined as much as 1.65 percent on a monthly basis while clothing prices fell 1.57 percent.

Unprocessed food prices were down 5.61 percent while fresh fruit and vegetable costs declined by 11.26 percent in June from May.

Hotel and restaurant prices increased 2.65 percent month-on-month, reflecting the strong demand for those services due to the nine-day-long Eid al-Fitr holiday.

Given the benign and promising inflation outlook, some analysts argue that the country’s Central Bank may kick off its easing cycle this month by cutting its key policy rate (one week-repo rate).

According to some economists, the bank may slash the policy rate by 100 basis points at the next monetary policy committee (MPC) meeting scheduled for July 25.

After this month’s MPC gathering, the bank will hold three more rate-setting meetings until the end of the year in September, October and December.

At its June 12 MPC meeting, the Central Bank decided to keep the one-week repo rate unchanged at 24 percent.

Developments in domestic demand conditions and the tight monetary policy support disinflation, the bank said in a statement following the June meeting.