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Inflation in Turkey surged to 75% in May, up from 69.8% in April, marking what economists believe will be the peak before prices begin to decline.

KEY POINTS

  • According to the Turkish Statistical Institute, a government agency, consumer prices increased by 75.45% annually and 3.37% monthly in May.
  • The sectors experiencing the highest annual consumer price increases were education at 104.8%, housing at 93.2%, and hotels, cafes, and restaurants at 92.9%.
  • Economists had earlier predicted that inflation in Turkey, with a population of 85 million, would peak around 75% before starting to ease.

ccording to the Turkish Statistical Institute, a government agency, consumer prices rose by 75.45% annually and 3.37% monthly in May.

The sectors with the steepest annual price increases were education at 104.8%, housing at 93.2%, and hotels, cafes, and restaurants at 92.9%.

Economists had earlier forecast that inflation in Turkey, a country of 85 million people, would peak around 75%. Turkey has been increasing interest rates for a year to try to cool prices, causing significant financial strain for the average Turkish consumer.

Turkey’s central bank has kept its interest rate at 50% since March, citing the need to counter rising inflation. The bank stated that “a tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed.”

The month-on-month CPI increase of 3.4% in May was higher than in both March and April, leading some analysts to expect a more uncertain trajectory for easing prices.

“We’re confident that inflation has now reached a peak, but with today’s release containing a few unpleasant surprises, the pace of disinflation in the second half of the year is looking a bit more uncertain,” wrote Liam Peach, senior emerging markets economist at London-based Capital Economics, in a research note.

The firm previously expected inflation to ease to 41% by year-end, while the Turkish central bank forecasts it will reach 38%.

Based on the current pace of inflation, it “may now end the year slightly higher,” Peach wrote, adding that “an extended pause in interest rates is likely for some time.”

Economists remain divided on whether Turkey’s central bank will cut interest rates by the end of this year or wait until 2025.

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Theresa Anyanwu

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