Turkey’s inflation rate rose above expectations again by climbing to 9.54 percent in August, dashing hopes of attaining its expected year-end target.
According to figures announced by the Turkish Statistical Institute (TÜİK) yesterday, consumer prices rose by 0.09 percent compared to the previous month, exceeding forecasts by analysts who expected the rate to decline from 0.03 to 0.1 percent.
With the continuing rise in prices, the index reached 9.54 percent on annual basis for the month, hitting the highest level in three months and marking the fifth consecutive month that the rate has remained above 9 percent. “The upward risks to inflation continue to be pronounced,” said HSBC Bank strategist Ali Çakıroğlu, pointing to an increase in taxi rates from September as one source of upward pressure.
“We see food group price rises were significant in the CPI inflation,” he said. Consumer food and non-alcoholic drinks prices rose 0.89 percent on the month, the data showed.
August’s inflation rate has supported growing skepticism regarding the Central Bank’s hopes of achieving its year-end target of 7.6 percent.
Turkish inflation had accelerated above expectations in July as well, climbing to 9.32 percent on an annual basis.
On Sept. 2, Deputy Prime Minister Ali Babacan said it was unlikely that Turkey’s year-end inflation rate would hit double digits, but he acknowledged the figure may end up above the government’s target of 7 percent.
Babacan blamed high food prices caused by the recent severe drought in the country for the higher-than-expected inflation.
Less room for rate cut
In its last monetary policy meeting on Aug. 27, the Central Bank announced that its tight monetary policy stance would be maintained until meaningful improvements in the inflation outlook, while leaving the interest rates on hold for another month.
The Central Bank has said in recent months that high processed food prices, particularly for bread and cereals, have been a factor in Turkey’s stubborn inflation. “The adverse impact of exchange rate developments since mid-2013 on annual inflation is gradually tapering off,” the Bank said in the statement released.
“However, elevated food prices continue to delay the improvement in the inflation outlook. In this respect, the Committee also evaluated the possible impact of the drought and the geopolitical risks on the inflation outlook,” it further said.
Interest rates have been a matter of debate in Turkey for some time since the bank insisted on maintaining high interest rates until clear signs of an improvement in the inflation outlook materialized, while some government officials blame the bank’s high interest rates policy for high inflation.