Turkish Inflation Rate May Rise to Four-Year High: Week Ahead

By Steve Bryant

Sept. 1 (Bloomberg) -- Turkey's inflation rate probably rose to the highest in four years in August, a level the central bank forecasts will be a peak as energy costs decline.

Inflation accelerated to 12.3 percent, the fastest pace since February 2004, from 12.1 percent in July, according to the median estimate of 12 economists surveyed by Bloomberg. The statistics agency will announce the data at 5 p.m. in Ankara on Sept. 3.

The central bank halted three months of interest rate increases in August after a surge in energy prices that drove up inflation worldwide faltered. At 16.75 percent, Turkey's benchmark rate is the highest of 59 countries tracked by Bloomberg.

``We'll see inflation peaking either in August or September after which it will slowly decline,'' said Sengul Dagdeviren, chief economist for ING Bank Turkey. ``The fall in petrol prices will help inflation fall although the pass-through may be slow.''

The central bank will publish its analysis of the August inflation data the following day. The bank's monetary policy committee next meets on Sept. 18.

Oil prices have dropped more than 20 percent from a record $147.27 a barrel reached on July 11.

Lower energy costs, combined with a slowdown in Turkey and the European Union, will create a ``gradual decline'' in inflation, the bank said on Aug. 26, outlining the reasons for its decision to keep rates unchanged.

The benchmark ISE National 100 Index fell 2.6 percent to 39,844.48 last week. The lira strengthened to 1.1819 against the dollar from 1.1873 and the yield on the benchmark government bond tracked by ABN Amro rose 0.13 percentage points to 18.8 percent.

Turkey's grain board will hold a tender on Sept. 4 to buy 250,000 metric tons of wheat. The government has suspended tariffs on imported wheat to boost stockpiles after two years of drought reduced output.

The following is a list of important events in Turkey next week:

Event                                                  Date
August Manufacturing PMI                               Sept. 1
August inflation data                                  Sept. 3
Central bank publishes inflation analysis              Sept. 4
State Grain Board to tender for 250,000 tons of wheat  Sept. 4

To contact the reporter on this story: Steve Bryant in Ankara at sbryant5@bloomberg.net.