June 29, 2020 / 2:53 PM / 5 days ago

Turkish inflation seen rising above 12% in June - Reuters Poll

ISTANBUL (Reuters) - Turkey’s consumer price index is expected to rise above 12% in June from 11.4% the month before, a Reuters poll showed on Monday, after the central bank cited upward pressure on prices in halting its policy easing cycle.

FILE PHOTO: People shop at a food market in Istanbul, Turkey, February 11, 2019. REUTERS/Murad Sezer

For the end of the year, the median inflation estimate of 11 economists was 9.5%, compared to the central bank’s forecast of 7.4%.

Turkish inflation, which reached a 15-year high in October 2018, has declined sharply since then, hitting single digits briefly last year. It has since risen and hovered around 11% even as the central bank aggressively cut interest rates.

But the bank unexpectedly held policy steady last week for the first time in nearly a year, during which the policy rate fell to 8.24% from 24%.

It cited “some increase in the trends of core inflation indicators,” but added that disinflationary effects will become more prevalent in the second half of the year.

The median estimate in a Reuters poll of 14 economists for the annual inflation rate in June stood at 12.09%, which would mark a second consecutive month of increase. Forecasts ranged between 12.47% and 11.90%. CPI stood at 11.39% in May.

The median for the month-on-month estimates stood at 0.65%, with forecasts of 12 economists ranging between 1% and 0.45%.

Food inflation picked up strongly in May due to weather conditions affecting agricultural yield. If the shock persists, headline inflation could be higher than expected, Goldman Sachs analysts wrote in a note.

“We also think that social distancing measures and other supply-side disruptions due to the pandemic create upside risks. Although there is a sizeable output gap that should lead to disinflationary pressures, the capacity restrictions may have an offsetting effect in some sectors,” they wrote.

The year-end forecasts in the Reuters poll ranged between 7.5% and 11.6%.

The Turkish lira, which hit an all-time low against the dollar in May, has recovered some ground but is down around 13% this year. A further depreciation would risk higher inflation via imports.

The Turkish Statistical Institute will announce June inflation data at 0700 GMT on July 3.

Reporting by Ali Kucukgocmen; editing by Jonathan Spicer

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