Turkish consumer prices fell slightly in February in line with a dip in food and drink prices, data showed on Thursday, coming in below market expectations but unlikely to affect the central bank’s cautious monetary policy stance.
Turkey’s consumer price index rose 8.78 percent year-on-year in February, the Turkish Statistics Institute (TurkStat) said on Thursday. This was the weakest figure since November, when the index hit 8.10 percent.
In January, annual consumer price inflation had jumped to 9.58 percent, hitting its highest level since May 2014 on the back of surging food, drinks and tobacco prices. Thursday’s data also showed domestic producer prices fell 0.20 percent on the month, for an annual rise of 4.47 percent.
The data triggered slight gains in the lira. The lira firmed to 2.9210 against the dollar by 1124 GMT from 2.9310 before the data. High inflation is a major worry for policy makers in Ankara and Turkey’s central bank left key interest rates unchanged for the 12th month running last month.
Economists did not think the data would change the central bank’s position on rates in view of food price volatility and with inflation tied to developments in the forex market. “Given the existing uncertainties, we do not expect the central bank to respond to the encouraging price data. We expect the central bank to maintain the status quo until April when Governor (Erdem) Başçı’s term ends,” said JPMorgan economist Yarkın Cebeci.
Başçı said at the end of January that Turkey will not be able to meet its 5 percent inflation target until the end of 2018. Food and non-alcoholic drink prices, a key inflation factor, dipped 0.04 percent on the month while the biggest rise was in the health sector where prices rose 1.8 percent. However, annual core inflation continued to rise and remained near 10 percent. Finance Minister Naci Ağbal told reporters in Ankara that food prices needed to be brought down and that he was working with the agriculture ministry on the issue and would soon announce related measures.
“Monetary policy is not enough on its own for inflation to fall. We have to support this,” the minister said, without specifying what the measures would be. Turkey’s year-end consumer price inflation will not exceed 7.5 to 8 percent, Industry Minister Fikri Işık said on Thursday in an interview with the broadcaster NTV. Turkey will also see a “serious increase” in domestic consumption in 2016, Işık said.
The Turkish lira’s more moderate depreciation against the dollar eases the upward pressure on inflation, Turkey’s development minister said on Thursday, after data showed consumer prices fell slightly in February. “A slower depreciation will continue to ease the pressure on CPI,” Development Minister Cevdet Yılmaz said in a statement. “A stable trend of the forex prices depends on political developments as well as on economic factors.”