Turkey’s inflation increases due to food prices

ISTANBUL - Anadolu Agency

The inflation indices rose for food and non-alcoholic beverages 3.91 percent in October from September. DHA photo

Turkey’s inflation rose by 1.8 percent month-on-month in October, above expectations due to rises in food and clothing, according to figures revealed by the state-run statistics body TÜİK yesterday. The inflation showed a 7.7 percent increase last month from the same month a year earlier as the Central Bank revised last week its inflation forecasts from 6.2 to 6.8 percent at the end of 2013.

While the food and clothing prices became the main determiner of the inflation rate that was above forecasts, loss in the Turkish Lira had limited effect on it, HSBC Portfolio Management Strategist Ali Çakır said.

The highest monthly increase was 9.5 percent in clothing and footwear as the indices rose for food and non-alcoholic beverages 3.9 percent, the TÜİK data showed.

Çakıroğlu stated that there were upward risks against the Central Bank’s inflation forecast at 6.8 percent. He said they foresaw that the inflation could approach 7.5 percent after October’s figures. He also noted that the Central Bank might enhance its cautious stance in monetary policy after the latest inflation figures.

Central bank’s forecasts ‘optimistic’

The Central Bank’s inflation target was optimistic because even though any price hike in natural gas, electricity or tobacco would not be made by the end of this year, it seemed difficult for inflation to fall below 7.5 percent under these conditions, T-Bank Chief Economist Veyis Fertekligil said.

Fertekligil said particularly a rise in clothing prices was very high. When a price hike in food was also serious, they all affected inflation rise, he said.

Despite the Central Bank recently raising its inflation rate forecasts, this statement could not ease the pressure on the currency, said economist Uğur Gürses. The revision of the Bank also raised the average funding interest rate, he said, adding that the bank reduced the share of money with policy interest rate in total money to 25 percent. “I foresee that it will raise funding interest rate from 6.25 to 6.50 with a 25 basis point rise,” he said. However, he noted that these steps and statements should have been made in due time and they couldn’t lower pressure on lira.

The highest annual increase was 14.3 percent in alcoholic beverages and tobacco. Food and non-alcoholic beverages (11.1 percent), education (10.1 percent), hotels, cafes and restaurants (9.4 percent), clothing and footwear (9.1 percent) were the other main categories that saw high annual increases.