Turkey’s March inflation data support further rate cut
Turkey's March inflation data was mixed as the producer price index (PPI) rose 1.26% above estimates and the consumer price index (CPI) came in 0.26% below estimates, according to data released by
Turkey's State Institute of Statistics (DIE).
Based on the March inflation figures, annual inflation figures were projected as 11.33% and 7.94% for PPI and CPI respectively.
The increase in crude oil prices and the special
consumption tax increase in February 2005 led to a higher-than-expected PPI. Despite the increase in PPI, economists believe that the country went through a deflationary period in March.
A sharp decline in clothing prices due to the discount season kept the monthly CPI below one percent. Price cuts in house-wares, education and entertainment also contributed to the low CPI level. Core CPI, excluding food and energy, rose 0.07% in March.
Clothing and shoe prices will contribute to deflation throughout 2005 thanks to rising competition caused by
China's increasing penetration into global textile and footwear markets.
Economists believe that a further rate cut is on the agenda. Despite the sharp increase in international petroleum prices, the expected improvement in CPI supports a further rate cut. The Central Bank of
Turkey could announce a rate cut of 50 basis points at its April meeting on Friday.