Inflation is expected to rise further in September due to exchange rate effects and the volatility in unprocessed food prices, the Central Bank of Turkey said on September 23 in a presentation to economists, adding that it maintains a tight policy stance to address the inflationary risks from the exchange rate pass-through and higher inflation expectations.

CPI inflation in Turkey generally picks up in September due to rising demand as a result of the launch of the school term and preparations for the winter season, however, the Central Bank also addresses exchange rate effect and food prices this time. The annual inflation advanced to 7.14% in August from 6.81% in July on the back of high food prices, while core inflation indicators deteriorated, reflecting the adverse effects of the weaker currency. Consumer prices are expected to increase by 0.59% m/m in September, the central bank’s monthly expectations survey showed on September 18.

The central bank also expects the contribution of net exports to pick up in the second half with the support of rising demand from the European Union economies. The improvement in the current account balance will resume with the August figure and will most likely continue throughout 2015, the Central Bank said, adding that the favorable impact of lower oil prices on the current account balance will be more pronounced in the forthcoming period. The Central Bank also commented that consumer confidence indicators point to a deceleration in the private consumption for the second half, however, the recovery in export orders is expected to limit the slowdown in the economic activity. The Central Bank expects some deceleration in employment in the second half.