Turkish annual July inflation dips below 12%, lira firms

Turkey’s consumer price inflation fell to a lower-than-expected 11.76% year-on-year in July, official data showed on Tuesday, reversing two months of rising inflation as the economy continued to emerge from lockdown.

The figures boosted the lira TRYTOM=D3, which firmed to 6.9270 against the dollar. The currency weakened last week to 7 on lingering worries over depleted FX reserves and costly state interventions to steady the currency.

Month-on-month, consumer prices rose 0.58% in July, the Turkish Statistical Institute (TUIK) said, compared to a Reuters poll forecast of 0.9%. The poll saw annual inflation at 12.10% in July, after it rose to 12.62% in June.

The largest consumer price rises in July were in the transportation sector, with a rise of 2.44%, while clothing and footwear prices dropped 3.48%. Key food and non-alcoholic drinks prices dropped 1.28%, the TUIK data showed.

Economists had cited coronavirus-related disruptions to production as contributing to the expected dip in year-over-year price rises.

The Turkish central bank, which has held its policy rate at 8.25% since June citing rising prices, last week raised its year-end inflation forecast to 8.9% from 7.4%.

As pandemic-related demand for goods gradually eases and things return to normal “inflation will enter a falling trend beginning in July,” the bank’s governor Murat Uysal said.

For year end, the poll’s median inflation estimate of 10 economists was 10%.

The producer price index rose 1.02% month-on-month in July for an annual rise of 8.33%, the data showed.