Turkey's annual inflation rate fell slightly more than expected to 15.01 percent in August, data showed on Tuesday, resuming its downward trend and likely paving the way for another interest rate cut as soon as next week.
The data boosted the lira and marked another positive surprise after figures on Monday showed Turkey's economy shrank less than expected in the last quarter.
Apart from a brief rise in July, annual inflation has been generally falling after hitting a 15-year high above 25 percent last October in the wake of Turkey's currency crisis, which tipped the economy into recession.
Consumer price inflation eased in August from 16.65 percent in July to hit its lowest year-over-year reading since May last year. It was below a Reuters poll forecast of 15.51.
Month-on-month, consumer inflation stood at 0.86 percent in August, also less than a poll forecast of 1.3 percent, data from the Turkish Statistical Institute (TUIK) also showed.
The Turkish lira traded at 5.7745 against the US dollar at 1024 GMT, its strongest in a week, up from 5.8170 before the data.
The recent easing of inflation allowed the central bank to cut interest rates in July for the first time in more than four years, and by a hefty 425 basis points. Analysts said the positive surprises in August would lead to more monetary easing.
“The expected continuation of the decline in inflation in the coming months gives the central bank room for future rate cuts,” said Muammer Komurcuoglu, economist at Is Invest.
“Unless there is an upward surprise on the exchange rate before the (policy) meeting, we expect a 250 basis points cut in the policy rate at the September meeting,” he said. The central bank will hold its next policy meeting on September 12.
The bank slashed its key rate to 19.75 percent in July, leaving Turkey with a still relatively high real interest rate, and has tied further cuts to further easing in inflation.
Central bank Governor Murat Uysal has said there is “considerable” room for maneuver on policy as the bank forecasts 13.9 percent inflation by the end of the year, and 8.2 percent at the end of 2020.
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