Turkey's consumer prices rose a greater-than-expected 0.47 percent month-on-month in June, official data showed on Monday, but the upside surprise was not seen changing expectations of further monetary policy easing.
Last month the central bank cut its overnight lending rate by 50 basis points, the fourth straight month of monetary easing amid cooling inflation and political pressure for lower rates.
The consumer price rises in June, which were led by a 1.16 percent increase in food and non-alcoholic drinks on the month, exceeded a forecast of a 0.10 percent rise in a Reuters poll.
Consumer prices rose 7.64 percent year-on-year, while domestic producer prices rose 0.41 percent on the month, for an annual rise of 3.41 percent, the Turkish Statistics Institute figures showed.
"After a long period the inflation momentum has turned upwards and this will make things difficult for the central bank on interest rate cuts," said Muammer Komurcuoglu an economist at Is Investment.
"But as long as there is not a serious worsening in global risk appetite and the lira does not face serious pressure, we think the bank can continue with upper band interest rate cuts," he added.
However he forecast that the inflation rise will continue in the second half of the year.
Since March the overnight rate - the highest of the multiple rates used - has been cut by 175 basis points. But the bank is seen slowing the pace of its monetary easing as it moves closer to using a single interest rate, according to economists briefed by bank officials after the latest policy meeting.
Inflation had recently been on a downward trend in Turkey, but remains significantly above the central bank's target of 5 percent. Economists worry that pressure from President Tayyip Erdogan for lower interest rates to fuel consumption could worsen the inflation outlook.
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