Oil Fall Offers Turkey Glimpse of Inflation Target, Simsek Says

Turkey’s inflation rate may near its five percent target if a slump in global oil prices is sustained, Finance Minister Mehmet Simsek said.

Consumer inflation may fall below six percent by the end of the year from 8.2 percent last month, Simsek said in a live television interview today. The fall in Turkey’s energy import bill will account for bulk of the drop in inflation if the price of oil remains below $60 a barrel, Simsek said.

“The oil price drop alone may result in a two-percentage-point decline in the inflation rate,” Simsek said. “Inflation could easily slow to the five-percent range with oil at current prices.”

Turkey hasn’t hit its inflation target since it was set at five percent in 2012, and annual price gains have remained well above that level since early 2011. Simsek said his year-end forecast could be met provided Turkey doesn’t see another winter of extremely dry weather, which boosted food prices above historical averages last year.

Central bank Governor Erdem Basci blames higher-than-expected food prices and a weak lira for missing his inflation target in 2014. Basci raised borrowing costs in an emergency meeting last January to bolster the currency, which depreciated seven percent over the past year. The governor’s forecast for end-2015 inflation is 6.1 percent, according to a report published Oct. 31.

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