Tur­key’s in­fla­tion falls in Novem­ber

Cyprus Today - - TURKEY -

TUR­KEY’S con­sumer price in­dex fell 1.44 per cent month-on-month in Novem­ber, of­fi­cial data showed on Mon­day, bring­ing the an­nual in­fla­tion rate down from a 15-year high as a stronger lira, tax cuts and dis­counted prod­ucts helped to trim prices.

A plunge in the lira’s value fu­elled the in­fla­tion surge this year, trig­ger­ing a mas­sive cen­tral bank rate hike but one an­a­lyst said the sud­den down­turn in prices now brought with it the risk of an early loos­en­ing in mon­e­tary pol­icy.

As it grap­ples with high in­fla­tion, one of the main eco­nomic con­cerns for in­vestors, the cen­tral bank has at the same time faced pres­sure from Pres­i­dent Re­cep Tayyip Er­doğan, a self-de­scribed “en­emy” of in­ter­est rates, to lower bor­row­ing costs to spur growth.

Year-on-year, con­sumer in­fla­tion stood at 21.62 per cent in Novem­ber, data from the Turk­ish Sta­tis­ti­cal In­sti­tute showed.

In its bat­tle against in­fla­tion, Ankara has cut taxes on con­sumer prod­ucts such as ve­hi­cles, fur­ni­ture and white goods and en­cour­aged shops to of­fer at least 10 per cent dis­counts un­til the end of the year.

“Tax cuts for au­to­mo­tive, white goods and fur­ni­ture sec­tors were the key fac­tor bring­ing down in­fla­tion,” said Muam­mer Ko­mur­cuoglu of İş In­vest­ment. “We ex­pect a lim­ited in­crease in De­cem­ber in­fla­tion as the ini­tial im­pact of tax cuts wane.”

Trans­porta­tion prices slid 6.46 per cent while food and non-al­co­holic bev­er­age prices fell 0.74 per cent, the data showed. The pro­ducer price in­dex fell 2.53 per cent in Novem­ber for an an­nual rise of 38.54 per cent.

Stoked by the weak lira, whose de­cline against the dol­lar this year peaked at 47 per cent in Au­gust, in­fla­tion surged to 25.24 per cent in Oc­to­ber.

Fi­nance Min­is­ter Berat Al­bayrak, Mr Er­doğan’s son-in­law, said the down­ward trend in in­fla­tion would con­tinue.

“We will con­tinue to carry for­ward the struc­tural steps that we have started in the fight against in­fla­tion with all our min­istries,” Mr Al­bayrak said on Twit­ter.

The lira has re­cov­ered in re­cent months af­ter a mas­sive 6.25 per­cent­age point rate hike in Septem­ber and an im­prove­ment in re­la­tions with the United States. It was steady at 5.2 against the dol­lar on Mon­day, still down more than 26 per cent this year.

Tur­key’s econ­omy is seen shrink­ing 1.4 per cent in the fourth quar­ter and of­fi­cially en­ter­ing a re­ces­sion, de­fined as two con­sec­u­tive quar­ters of neg­a­tive growth, in the first three months of 2019.

As the econ­omy slows and in­fla­tion falls, prospects for fur­ther rate hikes are now off the ta­ble, said Ja­son Tu­vey, se­nior emerg­ing mar­kets econ­o­mist at Cap­i­tal Eco­nomics.

“With po­lit­i­cal pres­sure on the cen­tral bank to loosen pol­icy likely to mount, there’s a grow­ing risk that pol­i­cy­mak­ers de­cide to loosen pol­icy even ear­lier, and more ag­gres­sively, than we cur­rently an­tic­i­pate,” he said.

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