Turkey's annual inflation rate down to 4-month low
Turkey's annual inflation rate fell to 10.90 percent in June, reaching its lowest level for the last four months, the Turkish Statistical Institute (TurkStat) announced on Monday.
Consumer prices in the sixth month of the year dropped by 0.80 percentage points, down from 11.72 percent in May, TurkStat said.
Monthly inflation was also down, declining 0.27 percent in June compared to the previous month.
The report showed the highest monthly increase was in education, up 1.05 percent, while the main drivers of yearly consumer prices were alcoholic beverages and tobacco, together up 21.70 percent.
The median estimate of an inflation expectation survey prepared by Anadolu Agency's Finance Desk, completed with the participation of 17 economists, was a zero-percent change on a monthly basis and 11.20 percent on an annual basis. The economists' expectation for the country's year-end inflation rate was 9.79 percent.
The new data was in parallel with recent Turkish Central Bank expectations which were released upon the institution's latest Monetary Policy Committee Meeting in June.
The Turkish Central Bank had expected a decline in the inflation rate after June, as it said food prices decreased after curbing measures taken by the government.
According to TurkStat, the highest monthly decrease was in clothing and footwear, with 1.25 percent. The consumer prices for food and non-alcoholic beverages fell by 1.06 percent, transportation 0.84 percent, communication 0.39 percent and recreation and culture 0.14 percent.
Commenting on the inflation rate, Enver Erkan, analyst at KapitalFX, said the fundamental factor in the data was the decline in food and non-alcoholic beverages prices.
"Most of that came from seasonal effects; we see the effects of measurements taken by the Food Committee in the upcoming months. The food supply will be supported by imports in the short term, in order to control the prices," Erkan explained.
Erkan also said domestic food production had been affected positively, thanks to good weather conditions, including plenty of rain, in May and June.
He also stated the adverse effect of foreign exchange rates had also been abolished as core inflation slipped to 9.20 percent.
"The fall of the consumer price index will continue in July. After the summer, inflation will rise again to higher levels," Enver added.
He said the change in exchange rates would be decisive for the year-end inflation rate which he expected to reach a single digit.
Vahap Tastan, research specialist at Alnus Yatirim, said the inflation rate saw its lowest level since February after a peak in April of 11.87 percent.
The inflation rate may see another peak in August and September; however, it will not be as high as the April level, he noted.
"We expect that the rate will continue to decrease gradually in the last quarter of the year," he added.
Tastan stated that policymakers do not only have to intervene on food prices but also in tourism-sector prices -- which saw a second highest monthly increase in June.
In June, consumer prices for hotels, cafes and restaurants rose by 1.03 percent, miscellaneous goods and services 0.52 percent, furnishing and household equipment 0.48 percent and housing 0.31 percent, TurkStat said.
Tastan recommended policymakers set up a tourism committee, similar to the Food Committee.
Hilmi Yavas, an economist at Seker Invest, said the inflation rate was far below market expectations.
"This is driven by a decrease in food and energy prices. Core inflation is weak on the back of core goods. It seems that the increase rate of core services has also slowed down," he added.
Yavas noted if food prices continue to decrease, inflation risks would decline.