UPDATE 2 - Turkey: Annual inflation eases as food prices slow down

UPDATES WITH DEPUTY PM MEHMET SIMSEK'S TWEET

ANKARA (AA) - Turkey’s annual rate of consumer price inflation decreased sharply in September after clothing and food prices slowed down, according to the Turkish Statistical Institute on Monday.

The annual inflation rate was 7.28 percent in September compared with 8.05 percent in August and 7.95 in September last year, TurkStat said in a statement posted on its official website.

Meanwhile, the monthly inflation rate increased by 0.18 percent in September compared with the previous month.

Enver Erkan, an analyst with KapitalFx, said: "When you consider [that] estimates for monthly increases were between 0.3 percent and 0.98 percent, we see that there is a figure even better than most optimistic estimates. In this sense, we can safely say that it is a positive surprise."

According to TurkStat, alcoholic beverages and tobacco prices rose to an annual 22.61 percent through September compared with 23.03 percent in June. Food prices also went up to an annual 4.16 percent during the month.

Clothing and footwear sector saw the highest monthly decrease with a 3.49 percent fall.

"Thanks to the work of agro committee, rebalancing of food prices continues. Having a share of 23.68 percent in inflation calculation basket, food prices, which declined 0.7 percent month-on-month, had an impact in falling consumer prices," Erkan said.

Inflation figures are being closely watched in Turkey as the Central Bank seeks to cut interest rates to lower levels in order to stimulate the economy; however, high inflation levels limit the bank's maneuverability.

"Retreat in inflation is very important since the Central Bank regularly introduces rate cuts. After a decline in inflation, I think there is one more rate cut in October monetary policy meeting. Most probably policy rate will be established at 7.50 percent at the end of a policy simplification," the analyst added.

Meanwhile, Deputy Prime Minister Mehmet Simsek welcomed the drop in annual inflation figures. "Positive macro news flow today. Turkey's annual inflation fell to 7.3 percent in Sep. [sic] from 8.1 percent in August. PMI [Purchasing Managers' Index] rose from 47 to a 4-month high of 48.3."