Economy Minister Ali Babacan has ruled out making any change to Turkey's year-end inflation target of five percent, despite a bigger than expected rise in prices in April and May, Turkish newspapers said on Saturday.
Data released on Friday showed Turkish consumer prices jumped 1.88 percent month-on-month in May, the biggest rise since October 2004, for an annual rise of 9.86 percent, well above market expectations. Producer prices rose 2.77 percent month-on-month and 7.66 percent year-on-year, also outstripping market predictions.
"Revising the inflation target is definitely not on our agenda at the moment," the liberal Radikal daily quoted Babacan as saying in his first comments on the May data.
"Revising targets is a serious business. It is not something that can be decided immediately. At the same time all our institutions are closely following developments. It is still very early to make an interpretation about year-end inflation." Babacan added that global markets remain highly volatile.
Investors have bailed out of Turkish assets over the past month in a general flight from higher-risk emerging markets and also because of increased political tensions in Turkey.
The lira, which lost 14 percent of its value in May, slid to around 1.574 to the dollar in Monday-dated trade on the inflation news, down from 1.528 just before the figures were published.
The Milliyet daily quoted Prime Minister Tayyip Erdogan as saying he was confident Turkey would meet its economic targets despite the increased inflationary pressures.
"Some will now say 'we are going backwards", but we have no such worry. God willing, we will reach our targets," Erdogan was quoted as saying during a visit to Turkey's Black Sea region. He accused his political opponents of wanting to create an impression that Turkey was heading for economic crisis whereas the country was in fact growing strongly.
Under Erdogan's centre-right government, Turkish inflation has fallen to single digits for the first time in a generation and economic growth has averaged nearly eight percent over the past four years. Turkey targets five percent growth in 2006.
But economists say increased inflation in April and May could force the central bank to end its policy of gradual credit easing and to hike interest rates in the near future.
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