People shop at a fruit market in Ankara, Turkey. Agence France-Presse
Turkey’s consumer inflation fell to its lowest level in a year in June thanks to a high so-called base effect and a drop in food prices, potentially paving the way for the country’s first interest rate cut since last year’s currency crisis.
The consumer price index fell to 15.72% year-on-year, official data showed, almost matching a Reuters poll forecast of 15.74% and down from 18.71% in the previous month.
Month-on-month, inflation stood at 0.03% in June, slightly less than a poll forecast of 0.05%.
After having hovered around 20% for most of this year, the marked drop in annual prices was largely because inflation began to sharply rise in June of last year — the measurement base effect — as Turkey’s crisis took hold and forced the central bank to hike rates in September to 24%, where they remain.
Annual inflation hit a 15-year high in October above 25%, but later dipped.
Analysts said on Wednesday the central bank could ease monetary policy at a July 25 meeting if the lira, which briefly gained on Wednesday, is not hit this month by threatened US sanctions over Turkey’s purchase of a Russian missile defence system.
“The inflation outlook will allow the central bank to start cutting rates in July,” said Erkin Isik, chief economist at QNB Finansbank. But he expects a cut of only one per centage point because - again due to base effects - inflation is expected to bounce back in July. Food and non-alcoholic beverages prices fell 1.65%, marking the sharpest fall in the data set in June, the data from the Turkish Statistical Institute showed. The producer price index rose 0.09% month-on-month in June for an annual rise of 25.04%.
Turkey’s lira shed some 30% of its value against the dollar last year, causing a recession to spill into this year.