ANKARA: Turkey’s annual core inflation registered the biggest fall in over a year, giving more encouragement to monetary policy makers who began cutting borrowing costs in March. The core rate, which excludes volatile items such as food, gold and energy, fell to 8.77 percent in May from 9.41 percent the previous month, beating the median estimate of 9.1 percent in a Bloomberg survey. The headline inflation rate rose a basis point to 6.58 percent as gains in food prices rebounded from the slowest pace on record.
The drop in the core figure comes as a boon to the central bank, whose monetary policy committee last month cited a limited decline in the gauge as a reason to maintain “tight liquidity.” The annual decline was the biggest since February 2015, when it fell 90 basis points from the previous month. It will also please President Recep Tayyip Erdogan, who has repeatedly argued for lower borrowing costs to stimulate the economy.
Now that the “stickiness” of earlier this year appears to have abated, Governor Murat Cetinkaya may find it easier to keep lowering interest rates, according to Bora Tamer Yilmaz, an economist at Ziraat Invest in Istanbul. “The pace of cuts will depend on how fast the core rate declines,” he said by phone.
