Turkish Inflation Exceeds 75%

Turkey’s consumer price inflation exceeded 75 percent in May, adding uncertainty to the disinflation process, official data showed on Monday.

Consumer price inflation accelerated to 75.45 percent in May from 69.8 percent in April, the Turkish Statistical Institute reported. This was the highest rate since November 2022, when the rate was 84.39 percent.

On a monthly basis, consumer prices gained 3.37 percent in May compared to a marginal 0.04 percent rise in the same period last year.

Data showed that education with 104.8 percent increase was the main group which showed the biggest annual growth. Clothing and footwear with 50.85 percent rise was the main group that indicated the lowest annual increase.

Another data from the statistical office showed that producer prices posted an annual increase of 57.68 percent, faster than April’s 55.66 percent. Month-on-month, the producer price index gained 1.96 percent.

At the May monetary policy meeting, Central Bank of the Republic of Turkey decided to maintain the policy rate at 50.0 percent after cutting the rate by a sharp 500 basis points in March.

ING economist said Muhammet Mercan said annual inflation is likely to drop rapidly with the large base and is likely to be in the central bank’s forecast range of 34 percent to 42 percent at the end of 2024, but close to the upper band during the remainder of this year.

The economist noted that the deterioration in pricing behavior and the rigidity in services inflation will remain as challenges.

Capital Economics’ economist Liam Peach said the pace of disinflation in the second half of the year is looking a bit more uncertain. The economist expects the central bank will wait until next year.

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