Türkiye’s May Inflation Falls Below Expectations, Fueling Speculation of Interest Rate Cuts

Türkiye’s official statistics agency TÜİK announced that consumer inflation (CPI) in May 2025 rose 1.53% monthly and 35.41% annually, marking a sharper-than-expected slowdown from April’s 37.86%. The data, significantly below market forecasts, has reignited speculation over a potential interest rate cut by the Central Bank.

While TÜİK’s figures showed a monthly increase of just 1.53%, alternative measurements diverged sharply:

• İstanbul Chamber of Commerce (İTO) reported a monthly rise of 2.83% and an annual inflation of 46.57% for Istanbul.

• ENAG, an independent inflation research group, calculated inflation at 3.66% monthly and 71.23% annually.

Experts React: “An Inflation Adjustment for a Rate Cut”

Economist Prof. Dr. Şenol Babuşcu posted a brief yet pointed comment: “An inflation adjustment for a rate cut…”, emphasizing the gap between TÜİK, İTO, and ENAG readings.

Prof. Dr. Hakan Kara, former Central Bank Chief Economist, noted the TÜİK data aligns closely with the Central Bank’s May projection of 1.6%, calling it “largely consistent.”

But İnan Mutlu criticized the divergence, stating: “TÜİK pulled an elephant out of a hat. A 1.53% monthly inflation figure is more than just a magic trick.”

Rate Cut Seen as Increasingly Likely

Economist Murat Sağman said the data would give the Central Bank “room to cut rates”, noting: “A cut in the June 19 policy meeting would no longer be a surprise.”

Iris Cibre reinforced this view, saying: “TÜİK’s May inflation data gave the Central Bank the space to lower rates,” while highlighting price declines in fresh produce and meat but significant increases in core goods like apparel and footwear.

Former CB Deputy: A Cut Is Technically Possible

Prof. Dr. Fatih Özatay, former CBRT Vice Governor, remarked: “If we assume this data is accurate, then a rate cut is technically possible.” However, he warned that monthly inflation must stay under 1.65% to meet the 29% year-end target.

Public Reactions: Real Wages Crushed

Fiscal expert Ozan Bingöl drew attention to wage erosion under current inflation:

• The net loss in minimum wage purchasing power is ₺3,335

• Pensions have lost over ₺2,100 in real terms
  He argued this makes mid-year wage hikes unavoidable.

Markets React Positively

Borsa İstanbul surged by 2% following the inflation release, with analysts citing renewed investor optimism over potential rate cuts.