Turkey's annual inflation falls to 6-month low at 9.79 percent in July
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Turkey's consumer price index (CPI) rose by 0.15 percent in July, but annual inflation eased to 9.79 percent from 10.9 percent in June, its lowest level in six months, the Turkish Statistical Institute (TurkStat) announced Thursday.

The CPI rose by 6.05 percent compared to December of the previous year and 9.44 percent on twelve months moving averages basis.

Earlier this week, Anadolu Agency's Finance Desk's survey of 22 economists predicted an average 0.03 percent increase in the monthly rate and an annual rate of 9.52 percent. The economists forecast year-end inflation rate at 9.66 percent.

The highest monthly increase was in the hotels, cafes and restaurants category with 1.75 percent, followed by recreation and culture with 1.36 percent, transportation with 1.13 percent, education with 1.05 and, furnishing and household equipment with 0.63 percent.

The highest monthly decrease was in the clothing and footwear category with 3.51 percent, followed by food and non-alcoholic beverages with 0.71 percent.

The highest annual increase was in transportation with 15.24 percent, followed by food and non-alcoholic beverages with 14.14 percent, health with 11.89, recreation and culture with 11.22, and hotels and restaurants category with 10.84.

Out of 414 items listed in the CPI of July, average prices of 271 items increased and average prices of 80 items decreased, while average prices of 63 items remained unchanged.

Commenting on the new rates, Timothy Ash, a senior emerging market strategist at London-based BlueBay Asset Management, said that although the country's headline inflation, which includes commodities such as food and energy prices, dropped to 9.79 percent in July, the core inflation rate, which strips out volatile food and energy prices, actually rose from 9.2 percent to 9.6 percent.

"The Producer Price index (PPI) was also higher, rising to 15.45 percent, from 14.87 percent. So better than expected headline - but disappointing core/PPI," he told Anadolu Agency.

"The Turkish Central Bank this week noted that over the autumn we might see inflation spike back up, as some of the consumption tax cuts roll off, but then drop back at year's end on high base period effects," Ash said.

The core print would still suggest the central bank has little near term scope to loosen policy, he added.

Turkish Central Bank Governor Murat Çetinkaya on Tuesday stressed that inflation was likely to follow a fluctuating course in the second half and it was projected to recover starting from the last month of the year.

The Turkish Central Bank raised its end-2017 inflation forecast to 8.7 percent, Çetinkaya said during the latest monetary policy committee meeting.

Enver Erkan, analyst at KapitalFX, also noted that although inflation had dropped to single digits as expected, keeping it at that level throughout the year would be difficult.

"Most probably, inflation will remain at some level above 10 percent and will decline to single digits again in December, thanks to base effect of the previous year. We expect a year-end inflation of 9.30 percent," he said.

Erkan said that food prices seemed to go lower in July, with the help of fresh fruit and vegetables and Food Committee's short-term measures such as imports and price ceiling.

"However, red meat prices remain at high levels. Transportation prices increased by a significant percentage with the effect of higher oil prices and the rise of transportation prices in Istanbul," he added.

Erkan said the analysts expected the monetary policy of the Central Bank to be tight in the upcoming months of the year.

"If the structural adjustments have a significant effect on inflation, Turkey's Central Bank would consider the opportunities of a looser monetary policy, by first loosening the liquidity situation, then cutting the policy rates," he said. "It is time to wait and strengthen the credibility by 2018."