Turkey's annual inflation rate decreases in February

Annual inflation rate falls 0.80 percent in February compared to first month of year according to Turkish Statistical Institute

Photo by: AA (Archive)
Photo by: AA (Archive)

The annual inflation rate fell to 8.78 percent in February from 9.58 percent in January, the Turkish Statistical Institute reported on Thursday.

Consumer price index has decreased 0.02 percent in February from the previous month, the report said.

The highest monthly increase was 1.84 percent in health services and 13.12 percent in hotels, cafes and restaurants according to the report.

“February is a low inflation month from a statistical perspective,” economist Bora Tamer Yilmaz at Ziraat Securities told Anadolu Agency.

“After the New Year price adjustments in January, there is less need to increase prices in just a month. Such a positive surprise will have implications for the monetary policy and [Turkish] lira asset prices,” Yilmaz said.

Yilmaz stated that tamed food inflation contributed significantly to the improvement of economic trends in the country.

“In fact, core inflation and services inflation still run at relatively high levels indicating persistent inflationary pressures [country feels],” he pointed out adding that the market has been concerned about double-digit inflation.

“Now we can say that inflation peaked in January and we should rule out double-digit inflation scenarios. We can see a dip in April below 8 percent depending on the volatility of food prices and how far food prices can improve,” Yilmaz commented.

“On the back of current disinflationary process, the central bank can start with its simplification this month,” Yilmaz added.

The Turkish Central Bank said on Monday, following its monetary policy committee meeting on Feb. 23, that leading indicators for February suggested a downtrend in food inflation, while annual energy inflation was seen falling due to developments of oil price.

"In sum, energy prices continue to affect inflation favourably, while other cost factors limit the improvement in the core inflation trend," the bank announced.

“The most important factor is that food and nonalcoholic beverages prices fell by 0.04 percent on monthly basis. This made food inflation decline to 8,83 percent annually,” ALB Securities analyst Enver Erkan said.

Erkan thinks that the Turkish government’s intervention on meat prices seemed to have an effect on the lower inflation.

The Food and Agriculture Ministry decided on Feb. 10 to impose a price ceiling for red meat in a bid to control price rises.

According to new price regulations, the maximum price for a kilogramme of ground meat should be 32 Turkish liras (around $10.9), while the maximum price of a kilo of diced meat should be 34 liras ($11.6).

Oil prices have fallen 65 percent since mid-2014, from $115 per barrel in June 2014 to below $30 per barrel in 2016, which is now $36.41 per barrel, reaching their lowest level in seven years, and recording the most rapid decline since 2008.

Inflation figures are closely watched in Turkey as the Central Bank officials have said they would maintain a tight monetary policy until there are clear signs of improvement in the inflation outlook.

Meanwhile, top international rating agency Moody’s has signalled that it expects the country's inflation at 8 percent at the end of the year.

TRTWorld, AA