Turkey’s Inflation Rate May Fall to 38-Year Low: Week Ahead

By Steve Bryant

May 4 (Bloomberg) -- Turkey’s inflation rate may have fallen to 6.9 percent in April, matching the lowest in 38 years and raising the prospect of further cuts to the benchmark interest rate.

Inflation eased to 6.9 percent from 7.9 percent in March, according to the median estimate of 10 economists surveyed by Bloomberg. The statistics agency will announce the data at 5 p.m. in Ankara today. The rate equaled that of July 2007 and was the lowest since July 1970.

The central bank has shaved 7 percentage points from the benchmark rate in sixth months as it tries to limit an economic contraction the government forecasts at 3.6 percent this year. The benchmark rate is 9.75 percent, a record low, and the bank said on April 29 that “there will be no clear recovery in economic activity in the short term.”

“Inflation should be benign because demand is low, the lira is stable and wage pressure is declining,” said Yarkin Cebeci, an economist for JPMorgan Chase & Co. in Istanbul. “It all supports the dovish stance of the central bank.”

Turkey’s economy contracted 6.2 percent in the fourth quarter of 2008, the first decline in seven years. The bank next meets to set interest rates on May 14.

The statistics office will also release figures for industrial production in March on May 8. Output slumped 23.7 percent in February, the most since monthly records began in 1986.

The benchmark ISE National 100 Index gained 6.7 percent to 31,651.81 at close of trade on April 30 before a public holiday. The lira gained to 1.5990 per dollar at 5:06 p.m. on April 30 from 1.6087 a week earlier and the yield on the benchmark government bond tracked by ABN Amro rose to 12.25 percent from 12.23 percent a week earlier.

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

Event                                                  Date
April inflation data                                   May 4
March Industrial output                                May 8

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