By Tuba Sahin and Bahattin Gonultas
The current inflation rate may create risks for pricing behavior amid declining food prices, said Turkey’s Central Bank in a statement Thursday.
“Although recent improvements in cost factors and (an) expected partial correction in food prices will contribute to disinflation, current elevated levels of inflation pose risks to the pricing behavior,” the bank said in minutes of a meeting held this June.
The bank said that domestic demand was expected to contribute to economic growth in the second quarter of 2017.
The economy grew at a rate of five percent in the first quarter of this year, compared to the same period last year, the Turkish Statistical Institute (TurkStat) reported.
The bank said Turkey’s exports would narrow down the country’s current account deficit.
“The high contribution from net exports to quarterly growth translates into a growth composition buoying up the current account balance,” the bank said.
Turkey’s current account deficit shrank to $3.6 billion in April, a fall of $542 million year-on-year, the Central Bank announced earlier this June.
“Thanks also to the tight monetary policy stance, Turkey still diverges positively from other emerging economies in the exchange rate and risk premium indicators,” the bank said.
The bank added that credit improvement were monitored regarding the extent of impact on the aggregate demand and economic activity.
“As improvement in economic activity gets stronger, demand conditions will offer less support to the disinflation process,” the bank said.
It added that it would continue to observe inflation expectations, pricing behavior and factors affecting inflation and if needed to deliver further monetary tightening.
Turkey’s annual inflation rate eased to 11.72 percent in May from 11.87 percent in April, TurkStat announced this June.
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