Basci Given Room to Hold Rates as Turkey’s Inflation Rate Drops

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Turkish consumer price inflation fell to the lowest level since 2013, giving central bank Governor Erdem Basci more room to maintain current interest rates.

The annual inflation rate eased to 7.2 percent from 8.09 percent in May, below the median estimate of 7.75 percent in a Bloomberg survey of analysts. Prices fell 0.51 percent compared with the previous month while the annual increase in food prices declined to 9.28 percent from 12.81 percent through May, Turkey’s statistics bureau said in a statement on its website.

The first monthly drop in prices this year still leaves annual inflation above the central bank’s 5 percent official target. The central bank said June 23 that falling food prices would ease inflation. Recent price volatility and global uncertainties still merit a “cautious” monetary policy approach, the bank said last month.

The slowdown “is certainly a relief for the central bank as softer inflationary dynamics should allow the bank to kick any rate hike further down the road,” Ipek Ozkardeskaya, an analyst at London Capital Group, said in an e-mailed note on Friday. That, in addition to expectations that the U.S. Federal Reserve will delay raising interest rates, may give the bank more time, she said.

The lira weakened 0.2 percent to 2.6907 per dollar at 11:04 a.m. in Istanbul.

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