Unexpectedly high food prices accelerate Turkish inflation in July

Turkish inflation accelerated above expectations in July, climbing to 9.32 percent on an annual basis due to disappointing food price levels, official data has shown, marking the fourth consecutive month that the rate remained above 9 percent.

The consumer price index increased 0.45 percent from the previous month in July, raising the annual inflation to 9.32 percent, according to figures announced by the Turkish Statistical Institute (TÜİK) on Aug. 4.

The producer price index, meanwhile, rose by 0.73 percent to 9.46 percent, the statistics body announced as well.

The inflation rate has surprised markets, which were expecting the rate to total between 8.9 and 9.2 percent, betting on a decline in food price increases. However, a recent drought has continued to keep food price high, meaning inflation has exceeded analysts’ forecasts.

“Food prices, in particular, had the worst second quarter in the history of the index due to supply shocks,” the Central Bank, which kept its annual inflation forecast at 7.6 percent for the year-end, said in a quarterly inflation report revealed July 24.

“The elevated level of food prices has been the main factor limiting the pace of the decline in inflation recently,” the report also warned.

The bank had drawn a more bright future for the price changes in the upcoming period, expressing an expectation that the inflation would trend downward, particularly thanks to the appreciation of the Turkish Lira and a firm monetary policy.

During the presentation of the report, Central Bank Gov. Erdem Başçı said the impact of exchange rate volatility on inflation had started to taper off from the second quarter.

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