Ankara - Turkey’s core inflation eased in April, suggesting that
consumer price gains may have peaked even as the headline rate rose to the
highest since 2008.
Annual core inflation, which strips out the impact of
volatile items such as food, slowed to 9.4 percent from 9.5 percent in March,
compared with the median estimate of 9.9 percent in a Bloomberg survey of
economists. Headline inflation accelerated for a fifth month to 11.9 percent
from 11.3 percent during the same period, the state statistics office said
Wednesday the highest since 2008 and faster than economists forecast.
The unexpected drop in the core index is partly due to a
revision in Turkstat’s methodology in January, which pushed apparel prices
about 3 percentage points below historical April levels, according to Odeabank AS
economist Sakir Turan. So price dynamics may have improved earlier than
predicted, he said.
“The worst may be already behind us unless there is another
price shock, such as a plunge in the currency,” said Turan, who had
estimated an annual rate of 10 percent. “That explains the muted reaction to
the data, although the headline inflation rate was higher than expected.”
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Tight Money
A deceleration in price gains could lead to a
faster-than-expected loosening of monetary policy. Governor Murat Cetinkaya has
pledged to keep money tight until the inflation outlook improves. The bank
raised the cost of funding to commercial lenders to the highest in more than
five years after the lira fell to a record in January.
The lira swung between gains and losses after the data
and was trading 0.2 percent higher at 3.5348 per dollar, close to where it was
before the inflation data came out.
Headline inflation exceeded the 11.7 percent median forecast
of economists surveyed by Bloomberg. Price climbs were led by food costs, which
rose 15.6 percent from a year earlier and 1.2 percent from March. Overall,
prices were up 1.3 percent from the previous month, Turkey’s
statistics institute said.
Last week, the central bank said it expects inflation
to accelerate in the short term before slowing in the second half of the year.
In January, the statistics office instituted an annual fixed
weight for items used to calculate price rises in clothing and food. In the
past, it allocated weights that varied monthly. The central bank said in its
April 28 inflation report that the new system was likely to drive down clothing
inflation in April and May, and push up inflation after August.
The methodology change will push the headline rate higher
during the last quarter of this year, according to Ibrahim Aksoy, a strategist
at HSBC Investment Management in Istanbul.
Following the likely peak in April, consumer price gains will be volatile
during the rest of the year and end 2017 around 9.5 percent, Aksoy said in an
emailed note.