Turkish inflation hits two-year high but comes below forecasts

ANKARA

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Turkey’s annual inflation has climbed to its highest level in two years, rising to 9.66 percent in May, but remained below forecasts thanks to an unexpected decline in food prices.

Inflation has remained below two-digit levels as consumer prices in the country rose by 0.4 percent over the previous month, coming in below the market forecast of 0.49 percent, according to data announced by the Turkish Statistical Institute (TÜİK) on June 3.

Lower-than-expected May inflation has brightened up the markets’ mood as the Central Bank and analysts were expecting the May inflation to be this year’s peak and the data to embark on a downward trend starting in June.

Analysts say the upbeat inflation backs Central Bank’s decision to cut its one-week repo rate in the May meeting, adding that the possibility of further reduction in the June meeting had become more likely after the release of new data.

The inflation has been pulled down by the lower-than-expected pace of the change of food and beverage prices.

The group, which showed the highest annual increase with 14 percent, has become the main spending group with the largest price decline on a monthly basis, declining by 1.35 percent from the previous month.

Meanwhile, the TÜİK data also showed that producer price index in the country declined by 0.52 percent in May, making the annual rise 11.28 percent.