Turkey inflation seen accelerating to 12.1 percent, straying from 2020 goal
Turkey’s inflation rate may climb to 12.1 percent in June, straying from a year-end estimate by the central bank, according to the median forecast in a Reuters poll.
Consumer price inflation will probably accelerate from 11.4 percent in May, Reuters said in the survey of 14 economists published on Monday. Estimates ranged from 11.9 percent to 12.5 percent.
Turkey’s central bank left interest rates on hold last week, surprising most analysts, after cutting them to 8.25 percent from 24 percent inside a year. The bank’s Monetary Policy Committee cited inflationary pressures for the decision.
Inflation in Turkey has accelerated from 8.6 percent in October as the central bank acted on government requests to reduce borrowing costs for banks. President Recep Tayyip Erdoğan sacked and replaced the bank’s governor last summer saying he had failed to support efforts to stimulate economic growth.
The Turkish Statistical Institute will publish June inflation figures at 10 a.m. local time on Friday.
Inflation is expected to slow to 9.5 percent by the end of the year, Reuters said, citing the median forecast of 11 economists. Predictions ranged between 7.5 percent and 11.6 percent. The central bank’s year-end estimate is for CPI of 7.4 percent.
June inflation could be higher than expected should a food price shock brought on by weather conditions in May persist, Goldman Sachs analysts said, according to Reuters.
“We also think that social distancing measures and other supply-side disruptions due to the pandemic create upside risks,” the analysts said in a report. “Although there is a sizeable output gap that should lead to disinflationary pressures, the capacity restrictions may have an offsetting effect in some sectors.”
Inflation has also been under pressure due to the weakness of the Turkish lira. The currency hit an all-time low of 7.269 per dollar in early May. It traded at around 6.85 per dollar on Tuesday, still down about 13 percent since the start of the year.
Declines for the lira make imports more expensive. Turkey imports nearly all the energy it consumes and many of its finished goods are comprised of imported materials and other items.