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.
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 the June inflation data at 0700 GMT on July 3.