Turkey’s inflation is expected to surge to 18.50% in July from 17.5% in June, partly due to energy price hikes, a Reuters poll showed on Wednesday, increasing pressure on the central bank to keep policy tight.
In double digits for most of the last four years, inflation has been pushed higher in recent months by the Turkish lira’s weakness and by depleted monetary credibility after President Erdogan sacked the hawkish former central bank governor.
The median estimate in a Reuters poll of 13 economists for July annual inflation stood at 18.5%, with forecasts ranging between 17.7% and 19.2%.
The median forecast of 10 economists for the monthly figure stood at 1.54%, with estimates ranging between 0.7% and 2%.
The main factors seen pushing inflation higher were the 15% hike to electricity prices and 12% hike to gas prices implemented at the beginning of July.
Annual inflation rising to 18.5% in July from 17.53% a month earlier would significantly squeeze real yields and could renew selling pressure on the lira, given that the central bank’s policy rate stands at 19%.
While the bank has pledged to keep rates above inflation, concerns about its ability to raise rates remain as Erdogan, a self-described “enemy” of interest rates, sacked the last three governors in two years.
The central bank has forecast inflation falling to 12.2% by year-end but that estimate remains far below market forecasts. The median of nine economists for year-end inflation stood at 16% in the Reuters poll, with forecasts ranging between 15% and 16.8%.
The median estimate for year-end stood at 15% in the June poll.
The bank will release its inflation report on Thursday but it has so far not signalled that it will raise its year-end forecast.
Governor Sahap Kavcioglu said this month that inflation could be higher than expected in July and August, but that monthly moves would not affect its year-end forecast of 12.2%, two sources on an investor call said.
They cited Kavcioglu as saying the bank expected inflation to show a marked fall at the start of the fourth quarter at the latest.
The Turkish Statistical Institute will announce July inflation data at 0700 GMT on Aug. 3.
Nasdaq