Ankara: Turkish inflation cooled for the second straight month in June, data showed yesterday, as a drop in food prices led to a lower-than-expected 10.9 percent increase in annual consumer prices.
The data, which marks a further fall from the eight and half-year peak of 11.87 percent hit in April, is unlikely to much affect the central bank’s tight monetary policy stance, economists said.
President Tayyip Erdogan has repeatedly called for cheaper credit, putting the CBRT central bank in the unenviable position of trying to balance his drive for lower rates with the need to rein in double-digit inflation.
“While we do not know how surprising June inflation was for the CBRT, we do not expect it to cause a substantial change in monetary policy in the short run,” said QNB Finansbank economist Deniz Cicek.
Month-on-month, consumer prices dipped 0.27 percent in June, the Turkish Statistics Institute said, compared with a forecast rise of 0.1 percent in a Reuters poll. The lira subsequently eased 0.5 percent to 3.5370 against the dollar.Food prices dropped 1.06 percent on the month and clothing and transport prices also fell, offsetting increases in education, restaurants and hotel costs, yesterday’s data showed.
“The declining food prices led to a positive surprise in inflation this month,” said Muammer Komurcuoglu, an economist at IS Investment. “After today’s figure, the possibility has emerged of inflation hitting single digits in July.” Producer prices rose 0.07 percent month-on-month in June for a year-on-year rise of 14.87 percent, the data showed.
Development Minister Lutfi Elvan forecast that inflation could fall to single digits if exchange rate stability continues and commodity prices remain at current levels.
Prime Minister Binali Yildirim said that the government had reached an agreement with labour unions on a public-sector workers wage rise of 7.5 percent for the first half of 2017 and 5 percent for the second half. In 2018, public-sector workers will get a wage increase of 3.5 percent in the first half and 3.5 percent in the second half.
