Turkish September Inflation Slows to 6.2%; Core Rate Hits 2 1/2-Year High

Turkish inflation slowed in September, a decline the central bank says will probably reverse later this year as the lira’s drop pushes import costs higher.

The inflation rate fell to 6.2 percent from 6.7 percent in August, the statistics office in Ankara said on its website today. The median estimate of eight economists surveyed by Bloomberg was 6 percent. In the month, prices rose 0.8 percent.

Central bank Governor Erdem Basci says inflation probably will accelerate in the fourth quarter. While a year-earlier jump in food prices capped the headline rate in September, the bank’s preferred measure of core inflation jumped to a 2 1/2-year high. The lira fell 22 percent against the dollar in the 12 months through September, driving up import prices.

“The data highlight the adverse impact which the weaker lira is having on the inflation outlook,” Tatha Ghose, senior emerging-market economist at Commerzbank AG in London, said in e-mailed comments. “Given the adverse growth environment, however, we think that the bank would still cut rates once extreme risk effects on emerging market currencies recede.”

Lira-denominated bonds gained after the figures were announced. Yields on two-year benchmark bonds fell to 8.39 percent at 10:30 a.m., after rising to as much as 8.48 percent earlier today.

Further Easing

The central bank cut its benchmark repo rate to 5.75 percent on Aug. 4, arguing the reduction was needed to shield the economy against possible recession in Europe, Turkey’s main trade partner. Further easing may be needed if European debt problems threaten Turkish growth, Basci said Sept. 29.

The bank argues that its overall monetary policy is disinflationary because controls on the supply of money and curbs on bank lending outweigh the lower interest rate.

Grocery prices rose 1 percent in the month, compared to an increase of 4.7 percent in September 2010. Clothing prices fell 3.2 percent last month.

Annual core inflation excluding energy, food, tobacco and gold prices accelerated to 7 percent in September from 6.2 percent a month earlier, exceeding the rate of headline inflation for the second time this year.

The energy regulator raised household electricity prices 10 percent starting this month. State gas importer Botas said residential gas prices will rise as much as 14 percent.

Consumer-price growth may accelerate to 8.5 percent by the end of this year, compared with an official target of 5.5 percent, the International Monetary Fund said on Sept. 22. There’s “a high chance” that the bank will meet its 2012 goal of 5 percent, Basci said on Sept. 30.

The cost of goods leaving Turkish factories and mines rose an annual 12.2 percent in September, compared with a rise of 11 percent the previous month, the statistics agency said today. Producer prices rose 1.6 percent in the month.

To contact the reporter on this story: Steve Bryant in Ankara at sbryant5@bloomberg.net.

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net.