Türkiye’s inflation eases slightly to nearly 61.4% in October

Türkiye’s annual inflation rate eased for the first time in three months and came in at nearly 61% in October, official data showed Friday, highlighting government efforts to counter the price increases.

The rate inched down to 61.36% in the 12 months to October, from 61.53% in September, the Turkish Statistical Institute (TurkStat) said, as fallout eased from both the Turkish lira’s summer decline and post-election tax hikes.

The pace of month-over-month increases also slowed to 3.43% from 4.75%, the data showed.

Both readings were lower than forecasts. In a Reuters poll, annual inflation was expected to rise slightly to 62.1%.

Price rises in clothing and shoes, houses and hotels, and restaurants drove the monthly measure higher, although it was less than expected in surveys.

An over 33% depreciation in the lira and a rise in wages, taxes, and fees mainly pushed inflation higher since June.

Inflation is expected to continue rising and peak in May 2024 between 70% and 75%, before entering a disinflation trend, according to the central bank, which on Thursday raised its year-end inflation forecasts.

It expects inflation to reach 65% by the end of this year and drop to 36% by the end of 2024, Governor Hafize Gaye Erkan said.

This revision was mainly led by higher food and energy import prices this year.

The estimates match those unveiled in the government’s medium-term program in early September. The new road map is centered around structural reforms, reining in price increases through tight monetary policy and eventually ensuring sustainable economic growth.

Inflation hit a 24-year peak of 85% last year and surged again in recent months as the lira weakened after a long easing cycle that has been reversed by the new economy administration appointed after the May elections.

With disinflation in focus, the central bank raised its key interest rate by 500 basis points to 35% last week, tightening policy for five straight months as part of a wider policy shift toward more conventional policymaking.

Since June, it has hiked rates by 2,650 basis points from 8.5% to rein in price rises. Erkan on Thursday said monetary tightening would continue until there was a visible improvement in inflation.

The bank cut its forecast for 2025 to 14%. The government expects it to fall to 15.2% in 2025, before dipping further to 8.5% by the end of 2026.

President Recep Tayyip Erdoğan has recently said tight policy would help bring down inflation.

Most analysts expect the bank to raise its key policy rate to 40% or higher in the coming months.

Erkan said the rise in inflation was driven by large shocks happening simultaneously, such as a surge in fuel prices, a hike in the currency basket and tax adjustments to meet the financial needs caused by the Feb. 6 earthquakes.

She stressed their inflation impact was largely completed, adding that the bank maintained a 5% medium-term target.

Meanwhile, the domestic producer price index was up 1.94% month-over-month in October for an annual rise of 39.39%, according to the Turkish Statistical Institute.