Türkiye’s annual inflation dips to below 62% in July
Annual inflation in Türkiye displayed a sharp drop in July as anticipated, official data showed on Monday, a slowdown mainly attributed to base effects, with officials seeing a further decline in the period ahead.
The consumer price index (CPI) eased to 61.78% last month, just below expectations, according to data from the Turkish Statistical Institute (TurkStat).
It marks the steepest drop in nearly two years and the second consecutive fall after inflation eased to 71.6% in June.
Monthly price growth, the Central Bank of the Republic of Türkiye’s (CBRT) preferred gauge, rose to 3.23%, also below expectations, according to the data. In June, monthly CPI inflation was 1.64%.
The median forecast of economists surveyed by Bloomberg and Reuters was for an annual reading of 62% and 62.1%, respectively. The latter estimated monthly inflation at 3.45%.
The annual inflation drop had been expected, mainly due to base effects. Officials and the central bank had earlier signaled they anticipated a temporary uptick in the monthly readings due to adjustments in administered prices.
“Annual inflation is falling,” Treasury and Finance Minister Mehmet Şimşek said on the social media platform X.
“We continue to get positive results in all areas of our program, whose main objective is disinflation,” Şimşek said.
“The decrease in inflation will be felt more in the coming period.”
In an interview on July 26, CBRT Deputy Governor Cevdet Akçay told Reuters the bank expected a burden of some 1.5 points on July’s monthly inflation due to adjustments in administered prices and taxes.
Economists had said mid-year price rises in alcoholic beverages and tobacco products, as well as rises in energy prices and tax adjustments to fuel, were likely to contribute to the monthly inflation spike.
The central bank has hiked its policy interest rate by 4,150 basis points since June last year and said it is monitoring inflation risks, vowing to tighten further in the case of a significant deterioration in inflation.
The bank kept borrowing costs unchanged at 50% for a fourth consecutive month in July.
It sees disinflation being established in the second half of the year, forecasting an end-year rate of 38% due to a tight monetary stance, moderation in domestic demand and real appreciation of the Turkish lira.
CBRT Governor Fatih Karahan is set to present the bank’s fresh inflation projections this Thursday.
Inflation traditionally eases during summer in Türkiye, as energy consumption falls and tourism brings in foreign currencies.
The domestic producer price index was up 1.94% month-over-month in July for an annual rise of 41.37%, the TurkStat data showed.
“The large fall in headline inflation in Türkiye in July will provide some comfort to the central bank that the disinflation process remains on track,” said Nicholas Farr, emerging Europe economist at London-based research group Capital Economics.
But, he added, “it will take time for policymakers to be fully convinced that they can begin easing monetary conditions.”
Education, housing, health, and hotel and restaurants saw the biggest annual price increases.
“We maintain our forecast for the first interest rate cut to arrive in 2025, a bit later than most others expect,” Farr said.
