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Turkish CPI expected to continue falling from 15-year peak in December, poll shows

Turkish CPI expected to continue falling from 15-year peak in December, poll shows
FILE PHOTO: A vendor displays fruits in his shop in a local market in central Istanbul, Turkey October 9, 2018. REUTERS/Murad Sezer/File Photo -
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Murad Sezer(Reuters)
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By Nevzat Devranoglu

ANKARA (Reuters) – Turkish annual inflation is expected to fall to 20.52 percent in December, declining for a second month from a 15-year peak in October, a Reuters poll showed on Friday, as tax cuts and discounted products decreased prices.

Month-on-month, the consumer price index is expected to fall 0.23 percent, according to 12 economists who participated in the poll.

Turkey’s lira <TRYTOM=D3> slumped in August, falling as much as 47 percent against the U.S. dollar since the start of the year on investor concerns about the central bank’s independence and a deterioration in U.S.-Turkish ties.

It has since recovered some ground after a hefty 6.25 percentage point rate hike in September and an improvement in relations with the United States. It currently trades at 5.2740 to the dollar.

“Our analysis shows a month-on-month fall of 0.1 percent, and the annual inflation to fall to 20.7 percent on the back of a stronger lira and lower oil prices,” Erkin Isik, chief economist at lender QNB Finansbank, told Reuters.

Isik said a 10 percent reduction in electricity and natural gas prices, coming into effect in January, alongside the fall in oil prices, would also help rein in inflation in the new year.

Economic indicators are improving after the currency meltdown, with the latest economic confidence index rising to 75.2 percent in December, the second monthly gain since it hit a 10-year low in October.

The government introduced tax cuts for some consumer products including vehicles, furniture and white goods and encouraged shops to offer at least 10 percent discounts until the end of the year on goods affecting inflation.

A December central bank survey showed that the end-2018 CPI was seen at 21.28 percent.

Earlier this week, President Tayyip Erdogan’s government, which is facing local elections in March, announced a plan to increase the minimum wage by more than a quarter next year, seen adding to add 1.5-2 percentage points to inflation.

The Turkish Statistical Institute will publish inflation data on Jan. 3 at 0700 GMT. Annual inflation hit 25.2 percent in October, its highest level since 2003.

(Writing by Ece Toksabay; Editing by Dominic Evans)

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