Global Courant
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Turkey’s monthly inflation rate for June was lower than expected, despite the ongoing lira collapse following the re-election of President Recep Tayyip Erdogan.
The Turkish consumer price index rose 3.92% month-on-month, official data emerged Wednesday. The reading was lower than Reuters’ forecast of 4.84% and compares to a 0.04% increase in May.
The biggest gains were attributed to tobacco and alcoholic beverage prices, which rose by 11.13%, while restaurant and hotel prices rose by 4.31%.
On an annual basis, inflation rose by 38.21%, also slightly lower than Reuters’ forecast of 39.47%.
“It could have been a lot worse given the 25% odd FX correction seen (by) post-election and concerns about FX pass through,” said Timothy Ash, BlueBay Asset Management’s Senior EM Sovereign Strategist, via a statement issued by email. e-mail.
Ash added that the central bank “will have to work very hard to bring inflation down meaningfully from here”.
In October last year, inflation in Turkey rose to 85%. The Turkish lira was last traded on 26.09 against the dollar.
“With Simsek there is at least a chance to manage all of this without a broader system crisis, but there is absolutely no room for a policy error at this stage,” Ash continued.
Erdoğan had appointed former head of economics Mehmet Simsek as his new Minister of Finance and Economy, who was known for his market-friendly policies.
In addition to that appointment, the new governor of Turkey’s central bank, former Wall Street banker Hafize Gaye Erkan.
Last month, the central bank raised the country’s key interest rate from 8.5% to 15% and confirmed that further gradual monetary tightening will take place until the inflationary situation in the country improves.
