Press Release on Summary of the Monetary Policy Committee Meeting – 28/01/2014, (2014-04)
No: 2014-04
Release Date: 28 January 2014
SUMMARY OF THE MONETARY POLICY COMMITTEE MEETING
Meeting Date: 21 January 2014
Inflation Developments
1. In December, consumer prices increased by 0.46 percent, while annual inflation rose to 7.40 percent. Energy prices were influential in this development and there was no significant change in the contribution of other main groups to the rise in annual inflation. In this period, core inflation indicators continued to follow a downward course as in November.
2. Annual food group inflation receded to 9.67 percent. In December, annual unprocessed food group inflation remained flat at 12.88 percent, while items other than fresh fruits and vegetables saw widespread price hikes. Processed food prices increased by 0.73 percent due to the bread and cereals group, while the group’s annual inflation declined to 7.11 percent. Leading indicators for January suggest that annual food group inflation will remain elevated because of the impact of adverse weather conditions on fresh fruit and vegetable prices.
3. In December, energy prices rose by 2.35 percent mainly owing to sharp increases in LPG and bottled gas prices. Moreover, the recent depreciation of the Turkish lira caused gas and diesel prices to rise. As a result, annual energy inflation recorded the lowest year-end level of the last four years despite rising to 5.15 percent.
4. In December, services prices increased by 0.39 percent, and the group’s annual inflation came in at 7.98 percent. The Monetary Policy Committee (the Committee) judged that, despite the favorable course of energy inflation throughout the year, wage increases and the recovery in domestic demand were influential in the rise of services inflation. However, it is noted that recent seasonally adjusted data indicate a slowdown in the underlying trend of services inflation.
5. Meanwhile, annual core goods inflation fell to 6.20 percent in December due to the downward contribution of clothing prices and the waning effects of the Turkish lira depreciation. Seasonally adjusted data also showed that the underlying trend of the group’s inflation was on a downward path. However, the resumed depreciation of the Turkish lira as of mid-December and January’s tax adjustments for automobiles may deteriorate the outlook for core goods inflation. In fact, leading indicators have recently pointed to a significant increase in prices of durable goods, especially automobiles.
6. In sum, given that core inflation indicators may show a marked increase in January, it is noted that inflation will remain significantly above the 5 percent target in the short term due to unfavorable food prices as well.