Turkey: Inflation comes in at highest level since April 2019 in July
Consumer prices rose 1.80% in July over the previous month, below June’s 1.94% increase, reflecting a steep decrease in clothing and footwear prices on the back of seasonal sale, offsetting higher prices for hotels, cafes and restaurants, amid the economic reopening; food and non-alcoholic beverages; and housing.
Inflation increased to 19.0% in July, above June’s 17.5%. July’s figure was the highest inflation rate since April 2019, influenced by higher commodity prices, and the lifting of Covid-19 restrictions. Meanwhile, the trend pointed up, with annual average inflation coming in at 15.2% in July (June: 14.6%). Core inflation fell to 17.2% in July, from the previous month’s 17.5%.
Looking ahead, the inflation outlook in the short term remains unfavorable amid the effect of the economic reopening, higher commodity prices—particularly for oil—, supply-side issues and as inflation expectations have risen, which will impact price-setting behavior. Moreover, the Central Bank raised its year-end inflation expectation from 12.2% to 14.1% in its July Inflation Report. That said, the currency has regained some strength in recent months, limiting FX pass-through, and consumer loans growth has slowed amid restrictions will likely limit upside pressures.