ANKARA: Turkey’s annual inflation slowed in April to the lowest level in three years, giving the central bank further room to lower interest rates after cutting the past two months. The consumer inflation rate dropped to 6.57 percent from 7.46 percent in March, Turkey’s statistics bureau said in a statement on its website Tuesday, compared with a 6.9 percent median estimate in a Bloomberg survey. The central bank’s inflation target is 5 percent. Food prices rose 1.38 percent on an annual basis through April, the slowest pace since at least January 2004.
The broad-based price slowdown paves the way for more rate cuts, though limited improvement in the core inflation index means the bank may continue to take “measured steps,” said Bora Tamer Yilmaz, head of macroeconomic research at Ziraat Invest in Istanbul. Core inflation, which excludes volatile items such as food and energy, fell to 9.41 percent from 9.51 percent.
“The bank will probably keep on lowering its main interest rates by up to half of a percentage point,” Yilmaz said by phone. “The decline in annual inflation rate might continue until June due to high monthly increases during this time last year.”
The lira was little changed immediately after the inflation report, and traded 0.2 percent higher 2.8001 per dollar at 11:08 a.m. in Istanbul. Former central bank Governor Erdem Basci lowered borrowing costs in March for the first time in more than a year, beginning an easing cycle that will enable policy makers to simplify the current monetary policy framework of three main interest rates in favor of a single rate.
Murat Cetinkaya maintained a cautious approach in his first public appearance as Basci’s successor last month. He kept the bank’s year-end inflation forecast unchanged from January at 7.5 percent, and said cuts to the bank’s overnight lending rate in the past two months were purely for simplification purposes and not meant to loosen monetary policy. The rate simplification process will happen “at the most reasonable pace,” Cetinkaya said.
