(Reuters) -Turkey's central bank is likely to scale back planned interest rate cuts, beginning with only 200 basis points next week, after inflation in August came in above expectations, driven by surging food and services, JPMorgan said on Wednesday.
Inflation came in higher than expected at nearly 33% annually and more than 2% on a monthly basis, readings that came after stronger-than-expected second-quarter economic growth was reported on Monday.
JPMorgan said it now sees upside risks to its year-end
inflation forecast of 29.5%, citing a reversal in earlier food price declines and strong domestic demand. The bank expects inflation to rise to 31.8% year on year in September, partly driven by back-to-school services repricing.
The central bank "is likely to keep the policy rate well above headline CPI inflation to prevent dollarisation among Turkish residents, especially in light of recent political turmoil," JPMorgan said in a research note.
The central bank has a policy meeting next Thursday.
JPMorgan now expects a policy rate cut of 200 basis points at its Sept. 11 meeting, down from a previously anticipated 300 basis points.
It also forecasts further 200-basis-point reductions in October and December, which would bring the policy rate to 37% by year-end, slightly above JPMorgan's earlier estimate of 36%.
(Reporting by Marc Jones and Canan Sevgili; Editing by Mark Porter)
