Turkish annual inflation nears 58%, well above forecast
Turkish annual inflation fell to 57.68% in January, official data showed on Friday, well above forecasts despite a favorable base effect that is expected to carry on until President Tayyip Erdogan faces tight elections in May.
On a monthly basis, inflation also exceeded all predictions and ticked up to 6.7%, the fastest since April 2022, much higher than a Reuters poll forecast of 3.8%. Annually, consumer price inflation was forecast to be 53.5%.
Although months of relative stability in the lira and an easing of global pressures are helping cool off inflation in Turkey, favorable statistical base effects have been among the biggest drags on prices.
Inflation hit a 24-year high of 85.51% in October, stoked by a series of unorthodox interest rate cuts that began in September 2021 and caused a currency crash late that year. The annual price measure is now easing relative to that run-up.
The comparison with 2022 readings — which were exceptionally high — likely means inflation will stay in decline over the coming months.
Keeping inflation in check is crucial for President Recep Tayyip Erdogan as he vies for a third term in elections slated for May, following the worst cost-of-living crisis in two decades.
But in a sign the Turkish leader may not be willing to wait for price increases to stabilize at a low level, Erdogan this week renewed his call for additional rate cuts, claiming again they will bring down inflation.
While the outlook for inflation is improving, the central bank still appears to be overly optimistic. Its own monthly survey of market participants in January put year-end price growth at about 32.5%, or about 10 percentage points above the latest official forecast.
Morgan Stanley economists said their base case is for Turkish inflation to slow to an annual 42% in May, “driven by strong base effects plus our assumption of stable FX until elections and price controls,” according to a report on Friday.