Monday, June 17, 2024
HomeEconomyInflation in Turkey higher than expected at almost 58%

Inflation in Turkey higher than expected at almost 58%

Turkey’s annual inflation fell to 57.68% in January, official data showed on Friday, but was well above forecasts, despite a favorable base effect that is expected to continue until President Tayyip Erdogan seeks to be re-elected in May.

On a month-to-month basis, consumer prices rose 6.65%, the Turkish Statistical Institute said, nearly double a Reuters poll forecast of 3.8%. Annually, consumer price inflation (TRCPIY=ECI) was forecast at 53.5%.

The strong monthly rise was due to a series of New Year’s price hikes, including for public transit, tobacco products and services, as well as higher food prices.

Turkey’s biggest grocery chains, under government pressure, froze or reduced the prices of hundreds of products in January, but industry officials said they could only do so for a short time given costs. It was unclear to what extent the price cuts might have affected inflation.

Inflation hit a 24-year high of 85.51% in October, fueled by a series of unorthodox interest rate cuts, sought by Erdogan, which began in September 2021 and caused a currency crash at the end of this year.

The annual price measure is now easing from that surge, which included an 11% rise from December 2021 to January 2022.

The data had little impact on the lira, which was last at 18.818 to the dollar. It’s been mostly flat since the summer, largely due to state management.

The Reuters poll also showed inflation is set to end this year at 41%, nearly double the rate of 22% forecast by the central bank, prolonging pressures on the cost of living which are a major concern for voters before the presidential and parliamentary vote. .

Economists expect annual inflation to fall to around 40% by the time of the May election, which is expected to be tight according to polls.

The National Producer Price Index rose 4.15% month-on-month in January, for an annual increase of 86.46% (TRPPIY=ECI), the data also showed.

Despite soaring prices, the central bank cut its policy rate to 9% from 19% since 2021, in an effort to reverse chronic current account deficits by stimulating investment with cheaper loans. The easing left real rates deeply negative.

“External inflationary pressure may be receding, but Turkey’s deeply negative real interest rate completely offsets this advantage and produces a worrying outlook,” Commerzbank analyst Tatha Ghose wrote in a note.

Reporting by Canan Sevgili, Azra Ceylan and Daren Butler; Editing by Jonathan Spicer, Mark Potter and Raissa Kasolowsky

source: turquie-news



Most Popular