Real Effective Exchange Rate Declines Despite Inflation Spike in Türkiye

The Consumer Price Index (CPI)-based Real Effective Exchange Rate (REER) index in Türkiye dropped by 1.55 points in April 2024, falling to 72.12, according to new data released by the Central Bank of the Republic of Türkiye (CBRT).

Meanwhile, the Domestic Producer Price Index (D-PPI)-based REER also declined by 2.34 points, settling at 93.22 compared to the previous month.

Currency Strength Outpaces Inflation

Despite a noticeable increase in domestic inflation, the primary reason for the drop in the REER index is the stronger rise in nominal exchange rates, which outpaced consumer and producer price growth.

When examining the contributing factors to the CPI-based REER index:

• The U.S. dollar appreciated by 2.84% compared to the previous month

• The euro strengthened by 6.96%

• Meanwhile, CPI rose by 3.00%, and D-PPI increased by 2.76%

This imbalance between currency appreciation and price index growth led to a real depreciation in Türkiye’s exchange rate value, further affecting import costs, external competitiveness, and foreign investment dynamics.

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