Consumer price inflation (CPI) rose 2.47 percent in August, driven by higher gas prices
Türkiye’s annual inflation rate decreased more than anticipated to 51.97 percent in August, according to recent data. This decline reflects a significant drop due to base effects and a reduction in food prices, keeping the central bank poised for potential interest rate cuts in the coming months.
On a month-to-month basis, consumer price inflation (CPI) rose by 2.47 percent in August, influenced by a rise in gas prices, although this was lower than market expectations, as reported by the Turkish Statistical Institute. In July, the monthly inflation rate was 3.23 percent, while the annual rate stood at 61.78 percent. Disinflation began after the annual CPI peaked at 75 percent in May, the highest figure since late 2022, as a prolonged monetary tightening strategy started to ease prices.
Key drivers
The annual inflation was primarily driven by a 121 percent jump in education costs and a 101 percent increase in housing prices, although these were somewhat mitigated by a 45 percent rise in food and non-alcoholic beverages, which carry significant weight in the index.
A Reuters poll had projected the annual inflation to drop to 52.2 percent in August, with expectations of a month-on-month increase of 2.64 percent. The poll also anticipated an annual inflation rate of 42.95 percent by the end of 2024.
Read more: Türkiye’s economic growth falls to 2.5 percent in Q2 2024 amid rising interest rates
Natural gas price impact
In August, the cost of natural gas for residential use saw a 38 percent increase—the first hike in nearly two years—contributing to the monthly CPI rise. Since June of the previous year, the central bank has raised interest rates by 4,150 basis points to 50 percent and has committed to further tightening if inflation deteriorates significantly.
However, given the recent disinflation trends and a slowdown in economic growth, analysts predict a potential rate cut around November or December. In August, the lira fell nearly 3 percent against the dollar, reaching new lows in recent days. Last Thursday, the central bank took additional measures to promote local currency holdings by adjusting required reserves.
The domestic producer price index increased by 1.68 percent month-on-month in August, resulting in an annual rise of 35.75 percent, according to the data.
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