Turkey’s inflation rate rises to 17.5%, a two-year high | Business and Economic News
As the lira continued to depreciate against the US dollar and the euro, the annual inflation rate in June was higher than expected.
Turkey’s annual inflation rate in June has jumped to a two-year high of 17.53%, surpassing the 17% forecast, and continues to expand after a brief decline, possibly delaying any rate cuts to later this year.
According to data from the Turkish Statistics Agency, Monday’s month-on-month consumer price index was also higher than expected, rising 1.94%, while the Reuters survey predicted 1.50%.
For most of the past four years, the inflation rate has remained in the double digits, but as the economy got rid of the coronavirus pandemic, the depreciation of the lira, the decline in currency reputation and the surge in demand, the inflation rate was suppressed.
President Recep Tayyip Erdogan’s devaluation accelerates Fired a hawkish central bank governor In March, it raised concerns about an early rate cut of the 19% policy rate.
Analysts said the hot inflation data eased these concerns. At 08:01 GMT on Monday, the exchange rate of the lira against the US dollar was basically flat at 8.6825, while the closing price on Friday was 8.7.
Reuters quoted Tim Ash of BlueBay Asset Management as saying: “It looks like the central bank’s commitment to keep real interest rates positive will be tested, and overall interest rates are likely to drive a 19% policy rate.”
In May, the inflation rate unexpectedly dropped to 16.59% due to delays in price increases due to the COVID-19 lockdown. Although the monetary tightening cycle started that month, it has been on an upward trend since September last year.
The producer price index in June rose by 4.01% month-on-month, and the annual increase was as high as 42.89%. This reflects that the currency has fallen by about 17% since mid-March, which has increased the overall price of Turkey, which relies on imports.
Data shows that transportation costs soared by more than 26% year-on-year in June, reflecting the rise in energy prices, while the increase in household goods was almost the same as the same period last year.
Central Bank Governor Sahap Kavcioglu said on Friday that inflation this month and next month may be higher than expected, but monthly changes will not affect its end of the year Forecast is 12.2%According to Reuters, two sources said during an investor conference call.
They quoted Kavcioglu as saying that the bank expects inflation to drop significantly by the beginning of the fourth quarter at the latest.
BlueBay’s Ash said that inflation data makes the bank’s year-end forecast “very optimistic.”
After Erdogan, who called himself the “enemies” of interest rates, abruptly fired the last three governors within two years, concerns about political interference in the independence of the central bank rose.