ANKARA: Turkish inflation rose more than expected in April, staying stubbornly above the central bank’s forecast for the end of the year and weighing against the likelihood of significant interest rate cuts in the near term.
Consumer prices rose 1.34 percent month-on-month in April, higher than a poll forecast for a rise of 0.80 percent, for a year-on-year increase of 9.38 percent, data from the Turkish Statistics Institute showed yesterday. Domestic producer prices rose 0.09 percent on the month, for an annual rise of 12.98 percent, the data showed.
“The higher than expected inflation was caused by the delayed effects of lira depreciation and the secondary effects of (higher) food prices,” said HSBC strategist Ali Cakiroglu.
“We expect the rise in inflation to continue in May, and inflation to gradually fall during the second half of the year.”
Central Bank Governor Erdem Basci said last week he saw room for a gradual lowering in interest rates but ruled out a deep cycle of easing, saying policy would stay tight until there was a clear improvement in the inflation outlook. The bank last week raised its mid-point forecast for 2014 year-end inflation to 7.6 percent from a previous forecast of 6.6 percent, well above its target rate of 5 percent, although Basci said he expected inflation to start falling from June.
Prime Minister Tayyip Erdogan, a strident opponent of high borrowing costs, called last month for an emergency rate cut, saying markets had rallied after his ruling party dominated March local elections and such a move would encourage investors. Erdogan is keen to see low rates and strong growth ahead of a presidential race in Augus.
“(The April data) decreases the possibility of rate cuts and postpones expectations to later months as the central bank would like to ensure that its tight policy stance drives inflation down to target levels,” said Erkan Dernek, a market strategist at Odeabank in Istanbul.
Reuters
