Turkish CPI inflation edges off 8-yr high

Data slightly easing pressure on central bank

ISTANBUL, June 5, (RTRS): Turkey’s annual consumer price inflation stood at 11.72 percent in May, official data showed on Monday, edging back from the 8-year high a month earlier and slightly easing pressure on the central bank to keep monetary policy tight.

Consumer prices rose 0.45 percent in May from the previous month, the Turkish Statistics Institute said, above the 0.35 percent increase predicted by a Reuters poll.

“The fall in inflation last month supports our view that policymakers will end the tightening cycle at next week’s MPC meeting,” Capital Economics Emerging Europe economist Liam Carson said in a note.

The Turkish central bank’s monetary policy committee (MPC) holds its rates-setting meeting on June 15. Consumer inflation was driven by a 5.97 percent rise in clothing and footwear prices but offset by a 0.55 percent fall in prices for food and non-alcoholic drinks and a 0.73 percent fall in transport prices.

At the end of April, the central bank raised its inflation forecast for 2017 to 8.5 percent from 8 percent and said it was ready to tighten policy further if needed.

In April, annual consumer price inflation was at the highest level since October 2008.

Referendum

Sharp lira declines over the last year have driven the inflation rise, but the currency has rallied since April’s referendum on boosting President Tayyip Erdogan’s powers.

The lira dipped below 3.5 against the dollar on Monday, its firmest since April 19.

In its first policy-setting meeting after the referendum, the central bank on April 26 lifted its late liquidity window rate by 50 basis points to 12.25 percent in an attempt to rein in inflation.

Producer prices rose 15.26 percent year-on-year in May, and were up 0.52 percent month-onmonth, the data showed.

Last week, Turkey’s trade deficit widened 49.5 percent year-onyear in May to $7.65 billion, data released by the Customs and Trade Ministry showed.

Exports rose 9.5 percent in May to $13.22 billion and imports climbed 21.4 percent to $20.88 billion, the data showed.

Gold imports to Turkey rose to 48 tonnes in May, up from 23.9 tonnes in April, and marking the highest monthly imports since August 2008, data from the Istanbul bourse showed.

Turkey’s gold imports rose 17fold in March, as Turks looked to hedge currency risk ahead of an April 16 referendum, followed by President Tayyip Erdogan’s earlier calls to buy gold instead of dollars.