Turkey's key rate, which is now the highest among developed and emerging economies, and the recent drop in oil prices are helping to slow consumer-price growth, according to a central bank statement on Aug. 5. The bank has added one and a half points to the rate since May as rising oil and food prices drove up inflation. Price growth reached 12.1 percent last month, the fastest pace in four years.
"Prolonged increases in food, energy and other commodity prices have
continued to exert significant upward pressures on headline inflation in the
second quarter of 2008. As a consequence, 6.8 percentage points of the 10.61
percent annual CPI inflation in June resulted from the direct impact of the food
and energy items"
Central Bank Inflation Report
Producer prices however seem to give the impression that there is still plenty of inflationary pressure coming along in the pipeline. Producer prices were up 1.5% on June prices in July, and by 18.41% over July 2007.
The lira was little changed at 1.1834 to the dollar after the bank decision was announced. The lira has now risen 12% since it hit a 2008 low of 1.3470 against the dollar on April 1 following the decision by the Constitutional Court to hear the case against the AKP, and has been rising steadily since.
In July, the bank raised its forecast for year-end inflation to 10.6 percent from 9.3 percent citing higher oil prices, which it estimated at an average price of $140 a barrel this year. Oil prices have slipped $30, or 21 percent, from the record $147.27 reached on July 11 on signs that global demand is falling because of record pump prices and a slowing economies.
Turkey's industrial output grew at just 0.8 percent in June, the slowest pace this year, according to data from the statistics office earlier this month.
Consumer confidence has set record lows in each of the five months through June.
On the other hand GDP growth accelerated in Q1, to an annual rate of 6.6% following a 3.4% rate in both Q3 and Q4 of 2007.