Türkiye’s annual inflation climbs to nearly 65% in January

Türkiye’s inflation rate registered a slight annual increase in January, but prices rose rapidly on a monthly basis, mainly due to a big rise in the minimum wage and an array of new-year price updates, according to official data Monday that came after a shuffle at the helm of the central bank.

The consumer price index (CPI) rose 64.86% year-over-year last month, the Turkish Statistical Institute (TurkStat) said, slightly faster than the 64.77% increase in December.

Month-over-month, consumer prices climbed 6.7%, the institute said, after a 2.93% gain in December, marking the highest increase since August.

Treasury and Finance Minister Mehmet Şimşek attributed the high spike in monthly inflation to “temporary effects” and said it is expected to converge in line with the targeted price path beginning this month.

“We do not expect these effects … to impact the main trend of inflation,” Şimşek wrote on social media platform X, formerly known as Twitter.

Among categories, there was a 92.27% jump in expenses for hotels, cafes and restaurants, and transportation charges grew sharply by 77.54%.

Prices for food and nonalcoholic beverages alone surged 69.71%, and health costs rose 78.57% from last year.

The biggest monthly sectoral price rise was shown by health, hotels and restaurants, followed by other goods and services.

The scheduled data came after the surprise resignation late on Friday of Hafize Gaye Erkan as central bank governor, citing the need to protect her family from what she called a media smear campaign.

She had aggressively hiked interest rates to 45% from 8.5% since June to cool inflation.

The tightening came after Türkiye endorsed more conventional policymaking after last year’s elections, also aimed at reducing trade deficits, rebuilding foreign exchange reserves and stabilizing the Turkish lira.

Erkan’s successor, Fatih Karahan, a former central bank deputy who played a big role in orchestrating the policy stance, has pledged to carry on the tight policy.

The central bank said last month that after 3,650 basis points of hiking since June it had reached a sufficient level to ensure disinflation, signaling a halt.

Haluk Bürümcekçi, founding partner at Bürümcekçi Consulting, said price pressures could spill into the coming months and jeopardize the central bank’s 36% year-end inflation target.

“There seems to be a problem with the market not perceiving the new monetary policy stance that has emerged after the last MPC meeting as tight enough. However, we believe that the messages conveyed by the bank in the last MPC meeting are strong on paper,” Bürümcekçi said.

In his first remarks after his appointment, Karahan said the priority was price stability, and that he would continue efforts to ensure disinflation, relying on a strong team.

His first public appearance will be in Ankara on Thursday when he will hold a briefing on the first inflation report of the year. Economists await to see whether and how much the bank raises year-end inflation expectations and how that might affect policy.

The monthly rise in the CPI was above the 6.5% forecast in a Reuters poll. The poll predicted an annual CPI of 64.5% last month, and the measure is expected to continue rising until midyear, before dipping after May.

A survey by Anadolu Agency (AA) expected a monthly increase of 6.84%, with the annual estimate at 65.07%.

Şimşek on Monday reaffirmed that ensuring price stability “is our top priority.”

“We predict that, starting from February, monthly inflation will decrease significantly and remain in line with our forecast,” he said.

“We will see a significant decline in annual inflation in the second half of the year.”

Separate data from the statistical office showed Monday that producer price inflation was 44.2% in January, almost in line with the 44.22% rise in the prior month. Month-over-month, the index moved up 4.14%.