Turkey Observes Hike in Fuel Prices

Turkey raised consumer electricity prices by 15 percent on Thursday. As well as,  natural gas prices for private households by 12 percent. Which will now contribute around 0.6 percentage points directly to the existing high inflation rate of 16.6 percent.

The gas supplier BOTAS announced that it would also increase the prices for natural gas. For industrial use by 20 percent and for electricity generation by 20.2 percent.

Inflation in Turkey has stagnated in double digits for almost four years; It unexpectedly fell to 16.59 percent in May but is set to rise again to 17 percent in June. Hence, delaying any cut in the key rate to 19 percent.

For most of the year the government has only modestly raised prices and taxes on items that would drive inflation further, with a target of around 5 percent.

Energy costs will have a pass-through effect on all goods and services components of the inflation basket, said Enver Erkan, chief economist at Tera Yatirim.
“We cannot expect any noteworthy fall in inflation for several months,” he said.

Due to the remaining risks from producer prices, oil prices, and a weak lira, there could be a decline in September or October due to a so-called base effect.

Oyak Securities said the price increases would add 0.6 percentage points to the consumer price index with no indirect impact.

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