Türkiye’s annual inflation rate eased for the first time in months, coming in at 71.6 percent in June, according to official data released on Wednesday. This figure was in line with government expectations and is likely the start of an anticipated slowdown in the upcoming period.
The consumer price index (CPI) rate decreased to 71.60 percent in the 12 months to June, down from 75.45 percent in May, the Turkish Statistical Institute (TurkStat) reported. The pace of month-over-month increases also slowed to 1.64 percent from the previous month’s 3.37 percent, coming in below overall market expectations.
“The disinflation process has begun,” said Treasury and Finance Minister Mehmet Şimşek in a post on X shortly after the data was released. He added that “the inflation trend implied by the annualized value of the seasonally adjusted three-month moving average is consistent with our year-end target.” The minister also noted that the monthly June data of 1.64 percent indicates an annualized inflation of 22 percent.
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Achieving policy objectives
“We will clearly see the success we have achieved in many areas such as financial stability, sustainable current account deficit, reserve accumulation and exit from the gray list in disinflation, which is the main target of our program,” Şimşek said.
Türkiye’s shift in monetary policy
Türkiye has been walking away from years of easy monetary policy, starting a major turnaround that has included interest rate hikes, a new medium-term economic program, and efforts to boost fiscal policy in order to rein in inflation and ensure sustainable growth.
Central Bank’s inflation forecast and actions
The country’s Central Bank, which has delivered aggressive monetary tightening since June last year, estimates that inflation will be 38 percent this year. In the last 12 months, the bank has gradually lifted its benchmark policy rate to 50 percent from 8.5 percent and has said it would “do whatever it takes” to prevent the inflation outlook from deteriorating.
In its last meeting last Thursday, the Central Bank kept the rates on hold, citing recent indicators that confirmed domestic demand “albeit still at inflationary levels, continues to slow down.”
Pre-release inflation expectations
Prior to the release of the data, an Anadolu Agency (AA) survey had predicted June inflation at 72.68 percent on a yearly basis and 2.28 percent on a monthly basis. The range for monthly inflation expectations was between 1.9 percent and 3.0 percent. The actual month-over-month reading of 1.64 percent came in below the expectations in the Reuters poll as well, where economists had anticipated this figure rising to 2.22 percent, with forecasts ranging between 1.75 percent and 3.29 percent.
In a Reuters poll, economists had forecasted that annual inflation would fall to 72.6 percent in June, dipping from the May level, which was the highest since November 2022.
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