Turkish central bank says core inflation slows, but remains elevated
Turkey’s central bank said core inflation, which has become a key indicator for its monetary policy, remained high despite a slowdown in October.
Higher dollar-based energy prices impacted inflation last month, the central bank said in a report on Thursday to summarise monthly price developments.
Consumer price inflation in Turkey accelerated to an annual 19.9 percent in October from 19.6 percent the previous month, the Turkish Statistical Institute said on Wednesday. Core inflation, which strips out more volatile items such as energy and food, slowed to 16.8 percent from 17 percent.
The central bank has cut interest rates to 16 percent from 19 percent over the past two months, saying that higher inflation was transitory and would soon revert to a downward path. The bank is under political pressure to cut rates by a government focused on economic growth and exports.
Central bank governor Şahap Kavcıoğlu, appointed by President Recep Tayyip Erdoğan in March, said in early September that monetary policymakers would focus on indicators such as core inflation when setting interest rates. The statement sparked concern among investors that the bank would cut interest rates quickly in line with Erdoğan’s wishes.
Some economists are predicting a further rate reduction in November. On Wednesday, London-based research firm Capital Economics said the bank would probably lower the benchmark rate by 1 percentage point to 15 percent.
The lira weakened by 1.1 percent to 9.69 per dollar on Thursday partly on concern about the financial impact of further reductions in interest rates.