Turkey’s inflation rates exceed expectations

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(PHOTO: AFP)

Turkey’s consumer price index (CPI) grew by 1.62 percent in May, exceeding expectations of 1.45 percent and raising inflation to 12.15 percent year-on-year, according to data released by the Turkish Statistics Institute (TurkStat) on Monday.

The producer price index (PPI) increased by 3.79 percent in the same month, growing by 20.16 percent year-on-year, the highest increase since 2003.

Although the numbers exceeded expectations, the Turkish lira was not significantly affected, dropping to 4.60 against the US dollar.

Some investors argued if Turkey’s central bank fails to hike interest rates at its executive meeting on Thursday, the Turkish lira will tumble again, according to the T24 news website.

“The market (is) interpreting this number as so bad, it is actually good in that it will leave the [Central Bank] very little wiggle room at its next MPC meeting now not to hike again,” said BlueBay Asset Management strategist Timothy Ash.

“This is no longer about rates, but the very credibility of the [Central Bank] and monetary policy more generally in Turkey after the incredibly damaging comments by Erdogan in London earlier last month,” he said.

“In the short term the inflation rise may continue due to base effects, but a falling trend will begin in the second half of the year with coordinated monetary and fiscal policy measures,” Deputy Prime Minister Mehmet Şimşek tweeted after the announcement of the inflation rates.

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