Türkiye’s Annual Inflation Declines for Eighth Consecutive Month, Settling at 42.1% in January

Türkiye’s annual inflation rate eased for the eighth straight month in January, reaching 42.12%, down from 44.4% in December, according to data from the Turkish Statistical Institute (TurkStat).

Key Drivers of Inflation

  • The largest price increases were recorded in education, housing, and health.
  • Transportation saw the lowest annual price rise in January.
  • On a monthly basis, consumer prices increased by 5.03%, slightly above market expectations.

Market Expectations vs. Actual Inflation

A Reuters poll of 10 economists had anticipated a sharper decline in annual inflation, with a median estimate of 41.25%. Forecasts ranged from 40.73% to 41.57%, while monthly inflation estimates were between 4% and 4.63%, all of which were lower than the actual figure.

Central Bank Policy and Inflation Trend

  • In January, the Central Bank of the Republic of Türkiye (CBRT) cut interest rates for the second consecutive month, lowering the policy rate to 45%.
  • The CBRT cited a declining underlying inflation trend as a reason for the move.
  • Between mid-2023 and March 2024, the central bank had aggressively raised rates before holding them steady for months.

Inflation Down from 75% Peak in Mid-2023

  • Inflation has been steadily falling since May 2023, when it exceeded 75%.
  • Tighter monetary and fiscal policies have played a role in curbing overheating domestic demand.

Despite the continued decline, inflation remains a key challenge for the Turkish economy, with prices rising more than expected in January, potentially influencing the central bank’s future monetary policy decisions.