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Turkey Inflation June 2019

Turkey: Inflation reaches one-year low in June

Consumer prices were largely unchanged from the prior month in June. The consumer price index rose a tepid 0.03% month-on-month, which was down from the 0.95% increase logged in May and marked the softest monthly price increase in the year-to-date. Moreover, the figure reflected weaker utilities and transportation price pressures, despite upward trending oil prices in June. June’s print also saw a noticeable softening of alcoholic beverages and tobacco costs, while food and non-alcoholic beverages prices continued to decrease.

Inflation, meanwhile, dropped to 15.7% in June from 18.7% in May and constituted a one-year low after last year’s currency crisis saw inflation rise to a series high of 25.2% in October. Core inflation, which excludes volatile price items such as energy and food, fell to 14.9% in June from 15.9% in the prior month amid tight monetary policy and feeble domestic demand.

Commenting on the June release, Muhammet Mercan, chief economist at ING Turkey, pointed out that while inflation continued its downward path, “the large base effect helps too, given that the 2018 figure was the highest June number since the start of the current CPI series in 2003.”

Looking ahead, inflation should continue moderating in the second half of the year chiefly due to a supportive base effect owing to the currency crisis in H2 2018. However, July inflation will likely increase, as Mercan pointed out that “the expiring special consumption tax cuts and electricity price hikes hint at another likely uptick.” Moreover, currency volatility will remain a key risk to the inflation risk.

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