ZCZC
BCN-13
TURKEY-ECONOMY-INFLATION-POLITICS
Turkish inflation tops 15% for first time since 2003
ANKARA, July 3, 2018 (BSS/AFP) – Inflation in Turkey surged to over 15
percent in June for the first time in almost one-and-a-half decades, official
statistics showed Tuesday, putting new pressure on the government of
President Recep Tayyip Erdogan to quell rising prices.
Consumer prices rose 15.39 percent in June from the same period the year
earlier, sharply up on the 12.15 percent reading in May, according to the
Turkish statistics office.
The highest annual rise in the month was seen in transport services, up
24.26 percent, and in prices of furnishings and household appliances, up
18.91 percent.
Also among the chief drivers of the rise were sharp hikes in the prices of
basic foodstuffs like onions, potatoes and carrots.
Battling inflation will be a key issue for Erdogan’s new administration
after he won presidential and parliamentary elections in the first round on
June 24 with new enhanced powers as head of state.
The last time inflation in Turkey topped 15 percent was in late 2003, a
year after Erdogan’s ruling party first came to power and when the country
was emerging from financial crisis.
The data makes a mockery of the central bank’s inflation target of 5
percent and even its 2018 forecast of 8.4 percent.
The data added to pressure on the Turkish lira, which has lost over 23
percent in value against the dollar this year. It lost around 0.95 percent in
value to trade at 4.67 against US dollar.
Markets are on tenterhooks to see who Erdogan appoints as his main economic
policymakers in an indication of what policy he will pursue in the new term.
Analysts say the stronger-than-expected rise in Turkish inflation is likely
to prompt the central bank to hike interest rates at its meeting later this
month. Last month, the central bank raised interest rates shortly after it
agreed an emergency rate hike of 300 basis points on May 23.
Jason Tuvey, senior emerging markets economist at London-based Capital
Economics, said the extent of the rise in inflation was “likely to be enough
to prompt a reaction from the central bank.”
He said that after the election “positive noises” had been detected from
Erdogan advisers “that the central bank will be allowed to tackle high
inflation.”
Turkey’s central bank is nominally independent but Erdogan has irritated
markets by repeatedly pressuring the bank to keep rates low.
BSS/AFP/MR/ 1500 hrs