Turkey: Consumer prices drop in July
August 3, 2011
In July, consumer prices dropped 0.41% over the previous month, which was larger than the subdued 0.07% contraction expected by market analysts and added credibility to the Central Bank's monetary policy mix. The monthly reading followed the pronounced 1.43% fall in June and broadly matched the 0.48% drop tallied in July 2010. In spite of the monthly drop, annual inflation inched up from 6.2% in June to 6.3% in July. The monthly drop reflected lower prices for food and non-alcoholic beverages as well as clothing and footwear. Meanwhile, the core inflation index, which excludes more volatile categories such as unprocessed food and energy, remained flat over the previous month. However, annual core inflation stepped up from 5.3% in June to 5.7%. According to the 28 July Inflation Report, the Central Bank of Turkey (CBT) left its year-end inflation forecast unchanged at 6.9% for 2011 and 5.2% for 2012. The official year-end inflation target remains at 5.5% for this year and at 5.0% for 2012. In addition, the dovish tone of the report reflected the CBT's contentment with the results of its monetary policy mix.