Turkey’s inflation rate rises more than estimates on hikes in food prices

Official figures from the Turkish Statistics Institute (TÜİK) showed on July 4 that the annual inflation rate rose to 7.64 percent in June from 6.58 percent in May.  Turkey’s annual inflation slowed in April to its lowest level since May 2013, as hikes in food prices lost pace.        

The monthly inflation rate increased by 0.47 percent in June compared with the previous month, according to TÜİK data. The highest monthly increase was seen in food and non-alcoholic beverages, with a 1.16 percent rise.  

Analysts have warned that continuous increases in food prices may be the case again with an expected recovery in Turkey’s food exports to Russia. 

After Russia had started to impose trade sanctions on Turkey’s agricultural products, food prices fell dramatically across Turkey, pushing down the inflation rate. 

“With the reversion of the positive base effect and an expected delayed effect of the minimum wage hike over general prices, we expect the inflation rate to continue to rise in the second half. The expected restart of Turkey’s exports to Russia will also lead to additional upward pressure on the food prices,” said İş Investment economist Muammer Kömürcüoğlu, as quoted by Reuters. 

The Central Bank said in its last monetary policy meeting in June that it would maintain a tight monetary policy in view of inflation expectations and pricing behavior. 

It noted that inflation showed a marked decline in recent months, mainly due to a favorable course in unprocessed food prices and an improvement in the core inflation trend. 

“However, developments in services inflation and unit labor costs necessitate the maintenance of a tight liquidity stance,” it warned. 

“Future monetary policy decisions will be conditional on the inflation outlook. Taking into account inflation expectations, pricing behavior and the course of other factors affecting inflation, the tight monetary policy stance will be maintained,” said the Central Bank.