Turkey’s annual inflation hit its highest level in six months, fueled by a slump in the Turkish currency that led to an emergency hike in interest rates.
Clothing prices rose 5.21 percent and transport prices 2.32 percent in May, driving the CPI rise, the TÜİK data showed.
The highest annual increase was 20.02 percent in transportation.
Core “C” inflation, excluding energy, food, drink, tobacco and gold, rose to 12.64 percent year-on-year from 12.24 a month earlier.
Deputy Prime Minister Mehmet Şimşek sought to play down the rise, saying that “to a large extent” it reflected base effects as well as oil price and currency movements.
“In the short term, the inflation rise may continue due to base effects, but a falling trend will begin in the second half of the year with coordinated monetary and fiscal policy measures,” Şimşek said on Twitter on June 4.
The currency had tumbled in May to a record low of 4.9290 against the dollar amid investor worries over the independence of the Central Bank.
At an emergency meeting on May 23, the Central Bank raised rates by 3 percentage points to support the failing lira. The bank then announced a change of rate policy that included doubling the one-week repo, which became the new benchmark.
After the inflation data, the lira rallied to below 4.6 against the dollar from 4.6563 at the June 1 close, as investors have expected a further increase in interest rates in the Central Bank Monetary Policy Meeting on June 7.
İş Investment economist Muammer Kömürcüoğlu said the rise in core inflation would impact pricing behavior negatively.
“Taking into account signals that the course of monetary policy will be closely linked to inflation, we think the Central Bank will go for a 100 basis point hike in its policy rate at its meeting this week,” he said, as quoted by Reuters.