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Turkish Inflation Slows as Government Intervention Bears Fruit

Turkish Inflation Slows as Government Intervention Bears Fruit

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Annual consumer price growth in Turkey eased below 20 percent for the first time since August, a sign that a government drive to rein in runaway inflation is paying off.

Headline prices rose 19.7 percent in February, compared with a 20.4 percent increase in January, the statistics office in Ankara said on Monday. The median estimate in a Bloomberg survey was for a 19.9 percent rise.

In a bid to put a lid on prices -- driven largely by a surge in food inflation -- authorities have been intervening in markets, purchasing produce directly from farmers and selling it at discounted prices at stalls across the nation.

Key Insights

  • Food inflation decelerated to 29.3 percent from 31 percent in January, which was highest reading going back to 2004. Still, food prices are running well above the central bank’s year-end forecast of 13 percent.
  • While the statistics agency isn’t collecting data from the municipality-run stalls, the government-backed drive is having an impact on inflation as its prompting others sellers to lower their prices too.
  • A core index that strips out the impact of volatile items such as gold, food and energy dropped to 18.1 percent from 19 percent, showing some improvement in underlying price dynamics after last year’s lira rout abates.
  • Producer price inflation slowed to 29.6 percent from 32.9 percent, a sign that manufacturers and service providers are less eager to pass on the rise in costs to consumers.

Markets

  • The lira strengthened after the data and was trading little changed at 5.3730 versus the dollar at 10:02 a.m. in Istanbul.

Get More

  • Read more on the central bank’s inflation expectations here.

To contact the reporter on this story: Cagan Koc in Istanbul at ckoc2@bloomberg.net

To contact the editors responsible for this story: Onur Ant at oant@bloomberg.net, ;Lin Noueihed at lnoueihed@bloomberg.net, Constantine Courcoulas

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