Turkey fuel price hike to spur inflation

A waiter takes payment at a restaurant in Istanbul. Rising gas prices could spur inflation in the country. (Reuters)

• The natural gas distributor blamed the hike on rising input costs

ISTANBUL: Turkey hiked consumer electricity prices by 15 percent and residential natural gas prices by 12 percent on Thursday, which together are expected add some 0.6 percentage points directly to inflation that is already well above target at 16.6 percent.
Gas distributor BOTAS said it would also hike natural gas prices for industrial use by 20 percent and that used for electricity production by 20.2 percent.
Turkey’s inflation has been stuck in double digits for most of the last four years. It dipped unexpectedly to 16.59 percent in May but is seen rising again to 17 percent in June, delaying any cuts to a policy interest rate set at 19 percent.
For most of the year the government has only modestly raised prices and taxes on items that would further fuel inflation, for which the target is in a range around 5 percent.
Energy costs will impact all goods and services components of the inflation basket due to a pass-through effect, said Enver Erkan, chief economist at Tera Yatirim.
“We cannot expect a noteworthy fall in inflation for another several months,” he said.
There could be a decline in September or October due to a so-called base effect by risks remain due to producer prices, oil prices and a weak lira.
Oyak Securities said the price hikes would add 0.6 percentage points to the consumer price index, excluding any indirect impact.