Turkey’s central bank has been raising interest rates since last year to combat soaring inflation after President Recep Tayyip Erdogan shifted his stance on orthodox monetary policy. However, September’s inflation rate of 49.4% exceeded the 48.1% forecast by Turkish economists, following a 52% rate in August.
Nicholas Farr, an economist from Capital Economics, noted that the smaller-than-expected drop would likely disappoint policymakers. He suggested that a monetary easing cycle may not begin until 2025, later than many analysts predicted.
Last month, the central bank held its main interest rate steady at 50% for the sixth consecutive month, while emphasizing its focus on inflation risks. The bank’s forecast predicts inflation will decrease to 38% by the end of this year, 14% in 2025, and 9% in 2026.
Farr expressed skepticism, stating that while inflation is expected to decline, the target of 38% by year-end seems “way out of reach.” He also highlighted concerns about the continued rise of core inflation on a monthly basis, with inflation increasing by 2.97% in September, according to the TUIK statistics agency.
This week, President Recep Tayyip Erdogan stated that inflation in Turkey is on a downward trend, assuring that “our people will feel the slowdown more in the bazaars and in their shopping baskets.”
However, data from the Istanbul Chamber of Commerce revealed that retail prices in Turkey’s largest city, Istanbul, increased by 3.9% on a monthly basis and 59.2% annually in September.
Turkey’s inflation had reached a record high of 85% in October 2022. It dropped to 38.2% in June 2023 but started to rise again, peaking at 75% in May before declining slightly.
In September, the highest price increases were seen in housing, which surged by nearly 98% year-on-year, followed by education at 93.6%, and restaurants and hotels at 65.4%.
