Page 27 - TURKRptJul19

renewed talk of US sanctions could quickly scupper talk of rate cuts,” Jason Tuvey of Capital Economics said in a research note entitled “Plunge in inflation brings rate cuts onto agenda, but all hinges on lira”. Turkey’s real rates stands as the highest in the world, according to Bloomberg. “The currency has rallied in the past few days after President Erdogan said that he had received reassurances from President Trump that no sanctions will be imposed in relation to Turkey’s purchase of Russian defence equipment. But there are mixed messages coming out of the US and the saga is not over. If the threat of sanctions escalates and the lira comes under pressure again in the coming weeks, the central bank will probably be forced to hold fire,” Tuvey added.
4.2.2 PPI dynamics
Turkey’s state-owned pipeline company BOTAS has increased the price of natural gas it sells to power plants by 6.5%. The company, however, kept the natural gas prices for residences and businesses unchanged. The price of natural gas the country’s power plants consume has been raised to TRY1,600/cubic meter from TRY1,500/cubic meter. BOTAS’s import costs have increased after the local currency was devalued and fell by 40% against the dollar last year.
The price adjustment in natural gas followed the 15% hike in electricity prices announced a week ago. The price hikes in electricity and natural gas are expected to push inflation up in July. The statistics office will announce the July inflation figure on August 3.
27 TURKEY Country Report July 2019 www.intellinews.com