ANKARA: Turkey's annual inflation is expected to have climbed to 16.9% in July due to expiring tax cuts and higher electricity prices, briefly interrupting a downward trend, a Reuters poll of economists showed on Friday.
In the wake of last year's currency crisis, which erased some 30% of the lira's value against dollar, overall inflation peaked at a 15-year high above 25%. Overall prices have since declined due in part to last year's interest-rate hikes, and inflation stood at 15.72% in June.
Year-on-year estimates ranged between 14.5% and 18%, according to the Reuters poll of 18 economists, while month-on-month forecasts were between 0.5% - 2.5% in July, the poll also showed, with estimates ranging between a drop of 0.17% and a rise of 0.42%.
"We expect a 0.5% decrease in food group and 1.6% increase in the overall CPO due to the expiration of the tax discounts, and the electricity price hike. Our forecast implies that annual inflation will increase to 16.9% from 15.7%," lender QNB Finansbank noted.
Discounts in the value added and special consumption taxes on white goods, furniture and automotives ended on June 30th. Adding to the price pressures, consumer electricity tariffs were hiked by 15% as of July 1.
In June, Turkey's CPI fell to its lowest level in a year thanks to a drop in food prices and a high so-called base effect, which after the July rise should again bring inflation readings down in August and September.
The price relief paved the way for a sharp interest rate cut of 425 points on July 25, the country's first policy shift since last year's currency crisis.
On Wednesday, Turkey's central bank cut its inflation forecasts and new governor Murat Uysal said it has "considerable" room for manoeuvre on interest rates in coming months, a week after it began what is expected to be a policy easing cycle.
The bank cut its inflation forecast for 2019 to 13.9% from 14.6%, but left next year's outlook unchanged at 8.2%. Uysal said policy would depend on the inflation outlook.
July inflation data will be released on Aug 5 at 0700 GMT.
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