More breathing space for the Turkish central bank.
Turkey’s annual inflation rate dipped to 9.79 per cent from 10.9 per cent in July, its weakest level since January, as the country’s currency has stabilised in recent months to help keep a lid on price pressures.
July’s inflation reading came in below an average forecast of 9.9 per cent compiled by Bloomberg and means inflation in the Turkish economy has steadily dropped an from eight-year high of nearly 12 per cent earlier this year (see chart above). Core inflation however – which strips out volatile elements – strengthened to 9.6 per cent from 9.2 per cent.
Domestic price pressures have been stoked by a steep decline in the value of the lira, which weakened to fresh record lows against the dollar at the start of 2017.
But a round of monetary tightening from the central bank has helped the currency find its feet. The lira has reversed all its year to date losses against the dollar, while inflation has now weakened for the third consecutive month.
Last month, the Turkish central bank kept its monetary policy stance unchanged for the fourth consecutive month. Policymakers said they would maintain their “tight” policy stance “until the inflation outlook displays a significant improvement”.
The currency weakened on the inflation numbers and is down 0.3 per cent at publication time to TRY3.5233.