Turkey inflation up near 70 percent, highest since 2022

ISTANBUL: Turkish annual consumer price inflation climbed to 69.8 percent in April, official data showed on Friday, a bit below expectations but the highest since late-2022 on strong rises in education, restaurants and hotels prices.

Commenting on the figures, Finance Minister Mehmet Simsek said April's month-on-month inflation, which was 3.18 percent, was in line with expectations. In March it stood at 3.16 percent.

"After annual inflation reaches its peak in May, it will begin to decline sharply in line with our predictions," Simsek said on social media platform X.April’s inflation rate marks the highest annual increase since November 2022, when inflation was around 85 percent.

A Reuters poll showed annual inflation was expected to be 70.33 percent in April, with the rate seen falling to 43.5 percent by the end of 2024 as an aggressive year-long monetary tightening cycle weighs.

According to the Turkish Statistical Institute, the biggest annual consumer price rise was in education, for which prices rose 103.86 percent, followed by restaurants and hotels at 95.82 percent. Food and non-alcoholic drinks prices were up 68.50 percent.

In January and February, inflation had climbed 6.7 percent and 4.53 percent respectively on a monthly basis, largely due to a big minimum wage hike and an array of new-year price updates.

The central bank has hiked rates by 3,650 basis points since June including a 500 basis-point rise in March due to deterioration in the inflation outlook.It held rates steady last month, nodding to the lagged effects of tightening, and vowed to tighten further in the case of a significant deterioration in inflation.

The central bank sees inflation peaking around 73-75 percent in May and starting its decline in the second half of the year, to reach 36 percent at end-2024.The domestic producer price index was up 3.60 percent month-on-month in April for an annual rise of 55.66 percent, the data showed.

While an eye-watering figure, April’s nearly 70 percent CPI read was actually a smaller jump than many analysts had expected. But any hopes of interest rate cuts are a long way off, economists said.

Turkey’s central bank has hiked its key interest rate to 50 percent, citing the continuing need to counter climbing inflation in the country. The bank said in March that “tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed.”

“The slightly smaller-than-expected rise in Turkish inflation in April to 69.8 percent y/y (consensus 70.3 percent) offers encouraging signs that price pressures have softened again,” Liam Peach, senior emerging markets economist at London-based Capital Economics, wrote in a note Friday.

“We think that inflation will fall in the second half of this year, but we are not quite as optimistic on the pace of disinflation. ... Against this backdrop, we still don’t expect the central bank to shift to cuts until next year.”