Turkish cenbank warns of volatile summer inflation as it holds rates

FILE PHOTO: A logo of Turkey's Central Bank is pictured at the entrance of the bank's headquarters in Ankara
FILE PHOTO: A logo of Turkey's Central Bank (TCMB) is pictured at the entrance of the bank's headquarters in Ankara, Turkey April 19, 2015. REUTERS/Umit Bektas//File Photo

July 14, 2021

ISTANBUL (Reuters) – Turkey’s central bank said on Wednesday that inflation could be volatile through the summer due to the easing of coronavirus measures as it kept its policy interest rate steady at 19% as expected.

In a statement after its monthly meeting, the policy committee said: “Possible volatility in inflation during the summer due to the reopening and high levels of inflation expectations continue to pose risks to the pricing behaviour and inflation outlook.”

The policy rate would be kept above inflation until indicators point to a permanent fall in medium-term readings, the bank repeated. It added that the current account, supported by an upward trend in exports and tourism, is expected to post a surplus through year end.

Turkey’s inflation rate jumped more than expected in June to 17.53%, mainly due to price rises in the furniture and household equipment group as well as transportation, which includes oil prices.

It fell unexpectedly in May when there was a partial lockdown.

Prices have also been stoked by the lira’s weakening of around 14% against the dollar so far this year. The weak lira leads to higher prices through imports, on which Turkey relies, and is also reflected on producer prices, which rose nearly 43% annually in June.

(Reporting by Ali Kucukgocmen and Daren Butler; Editing by Jonathan Spicer)