Turkey Swaps Fall as Manufacturing Index Signals Inflation Peak

Turkey’s two-year interest-rate swaps fell as a manufacturing gauge moved lower and Istanbul city data suggested inflation may have peaked.

The two-year swap rates dropped 52 basis points at 9.68, heading for the biggest decline since Oct. 6. Consumer price inflation in Istanbul city declined by 0.22 percent in January over the previous month, the chamber of commerce said. The manufacturing PMI fell to 51.7 in January, its lowest level since September, from 52 a month earlier, according to the HSBC purchasing managers’ index released by Markit Economics.

“I expect January to be the last high inflation reading; after that it should peak and decline,” Tatha Ghose, senior emerging market economist at Commerzbank AG in London, said in e-mailed comments. Inflation will drop to about 6 percent at the end of 2012, Ghose predicted.

That prognostication is close to a couple of analysts’ outlook for inflation, which at the end of this year may decline to 7 percent, according to Ali Ihsan Gelberi, head of research at Turkiye Garanti Bankasi AS, and Murat Yardimci, chief trader at ING Bank AS, in Istanbul.

The Ankara-based statistics office will release January’s consumer price inflation data on Feb. 3. The central bank said yesterday it expects price increases to fall to 6.5 percent this year from 10.5 percent in December, the highest in three years.

“Given the weakening in domestic demand and the lira strength, we expect underlying inflationary pressures to remain weak in January,”Yarkin Cebeci, economist at JPMorgan Chase Bank in Istanbul, said in an e-mailed note. “A slightly above consensus headline CPI is unlikely to have any market impact.”

The lira rallied 7.3 percent this year against the dollar, the best performance among emerging-market currencies after the Hungarian forint, Polish zloty, Indian rupee, Mexican peso and Brazilian real. The currency weakened 18 percent last year in the biggest decline worldwide as the current-account deficit widened to a record and European debt crisis intensified.

To contact the reporter on this story: Selcuk Gokoluk in Istanbul at sgokoluk@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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