Turkish Central Bank says food prices and exchange rate are key risk factors for inflation outlook

By bne IntelliNews March 24, 2015

Core inflation indicators continued to decline in February, however, the current course of food prices and the exchange rate developments are the key risk factors regarding the inflation outlook, the Central Bank said on March 24 in the minutes of its latest monetary policy committee (MPC) meeting, adding that indicators for March signal that the annual food inflation will remain high and the inflation will hover above the level indicated in the January Inflation Report for some time.

On March 17, the Central Bank has kept its main rate (one-week repo) steady at 7.50% and left its overnight lending rate and borrowing rate unchanged at 10.75% and 7.25%, respectively.

The committee expects energy prices to have a less constraining effect on annual consumer inflation due to soaring prices of fuel and bottled gas amid the TRY depreciation in March.

The developments in the terms of trade and the moderate course of consumer loans contribute to the improvement in the current account balance in January and the monetary authority expects current account balance to improve further throughout 2015. Indicators for the labor market point to no significant recovery in employment as of the first quarter of 2015, the Bank commented, adding that economic activity lost some momentum in the first quarter of the year as a result of the weak external demand, the volatile financial markets and adverse weather conditions. The committee also said that recent indicators suggest that private domestic demand has contributed moderately to growth albeit at a slower pace in the first quarter of 2015. The Committee will monitor the data closely for a while before making a more definitive assessment regarding the underlying trend of economic activity.

February CPI by Main Expenditure Groups (%)
  Weights m/m y/y
Headline 100 0.71 7.55
Food and non-alcoholic beverages 24.25 2.59 13.70
Alcoholic beverages and tobacco 4.82 -0.44 3.91
Clothing and footwear 7.38 -6.58 7.40
Housing, utilities 15.79 0.46 7.50
Furnishings, household equipment 7.78 0.23 7.37
Health 2.57 0.82 8.29
Transportation 15.38 1.77 -1.49
Communications 4.38 0.94 3.95
Recreation and culture 3.54 0.58 6.03
Education 2.53 -0.08 7.96
Hotels, cafes and restaurants 6.98 1.06 12.66
Miscellaneous goods and services 4.60 0.59 9.18
Source: tuik      

Related Articles

Turkey to refuse extradition of all suspects to US unless Washington hands over Gulen says Erdogan

Turkey will not extradite any terror suspects to the US if Washington continues to refuse to hand over Fethullah Gulen, President Recep Tayyip Erdogan said on January 11. Ankara blames the ... more

Record decline in Turkish central bank’s gross forex reserves pushes holdings to $89.9bn

The Turkish central bank reported on December 7 that its gross forex reserves last week experienced a record drop, declining to $89.85bn on December 1 from $96.35bn a week earlier. ... more

EU governments reportedly agree to cut Turkey’s pre-accession funds

EU governments have agreed with the European Parliament to withdraw €105mn that would have gone to help finance political ... more