Turkey's consumer price inflation surged past 75 percent in May, adding further complexity to the disinflationary efforts, as revealed by official data on Monday. According to the Turkish Statistical Institute, consumer price inflation jumped to 75.45 percent in May, up from 69.8 percent in April. This marks the highest inflation rate since November 2022, when it peaked at 84.39 percent.
On a month-to-month basis, consumer prices increased by 3.37 percent in May, a significant rise compared to the marginal 0.04 percent increase observed during the same period last year.
The data indicated that education experienced the most significant annual growth, with a 104.8 percent increase. In contrast, clothing and footwear saw the smallest annual rise, at 50.85 percent.
Additional data from the statistical office revealed that producer prices rose by 57.68 percent annually, accelerating from April’s 55.66 percent increase. On a monthly basis, the producer price index climbed by 1.96 percent.
In its May monetary policy meeting, the Central Bank of the Republic of Turkey opted to maintain the policy rate at 50.0 percent, following a substantial 500 basis point rate cut in March.
ING economist Muhammet Mercan suggested that annual inflation is expected to drop rapidly due to the large base effect and is likely to align with the central bank’s forecast range of 34 percent to 42 percent by the end of 2024. However, he anticipates it will remain close to the upper band for the rest of this year. Mercan further highlighted ongoing challenges, such as deteriorating pricing behavior and persistent services inflation.
Liam Peach, an economist at Capital Economics, expressed that the disinflation pace in the latter half of the year appears more uncertain. Peach expects that the central bank might hold off any changes until the following year.
