Consumer prices in Türkiye increased slightly more than expected in November, official data showed on Tuesday, but annual inflation still marked the lowest level since mid-2023.
The inflation still continues its decline, but the downward pace has slowed in recent months, potentially reducing the prospect of an interest rate cut later this month.
Annual inflation eased to 47.09% last month, down from 48.6% in October and further away from a peak of 75.45% in May, the Turkish Statistical Institute (TurkStat) said.
Month-over-month, inflation rose 2.24%, compared with 2.88% in October.
Prices of food and non-alcoholic beverages, the biggest contributor to inflation, jumped 5.1% from the previous month, the TurkStat data showed, underlining the central bank’s continued struggle against years of high inflation. On an annual basis, they rose 48.6%.
Health-related prices rose 2.69% on a monthly basis, while services prices jumped 1.61%, slightly less than the previous month. Monthly rent prices, one of the stickiest items in services inflation, rose 4.18% in November, compared with 5.5% in October.
Core inflation, which strips out volatile items including food and energy, rose 47.1% year-over-year, less than 47.8% in October.
Surveys had expected the consumer price index (CPI) inflation rate to slow to 46.6% on an annual basis, while the monthly figure was seen at 1.91%, mainly due to food and medicine prices.
Vice President Cevdet Yılmaz and Treasury and Finance Minister Mehmet Şimşek on Tuesday both said annual inflation had declined by 28.4 points since May, while highlighting the progress in reducing inflation rigidity.
“Despite high food inflation over the past two months, annual goods inflation fell below 40%. Services inflation, at 1.6% on a monthly basis, reached its lowest level since November 2021, and the downward trend in annual services inflation continues,” Şimşek wrote on social media platform X.
“The decline in services inflation and improved inflation expectations indicate that we have made significant progress in reducing rigidity.”
Eyes on easing cycle
The Central Bank of the Republic of Türkiye (CBRT) has hiked its benchmark policy rate by 4,150 basis points since June last year as part of a shift to more conventional economic policies, and has kept its one-week repo rate steady at 50% since March.
It is watching monthly inflation closely as it decides when to cut its main interest rate, with expectations having grown in recent weeks that easing could come as soon as December.
Delaying rate cuts until next year, after “critical decisions” on the minimum wage and other administered prices “would be more appropriate,” said Haluk Bürümcekçi, founding partner at Bürümcekçi Consulting, of an expected Jan. 1 rise to minimum wage.
But he added the central bank’s latest policy statement “suggests that rate cuts are a serious option” for December.
After its policy meeting last month, the bank said it would set its rate to ensure the tightness required by the projected disinflation path, setting the stage for a cautious easing cycle.
The bank had also predicted that food would elevate overall inflation in November.
Vice President Yılmaz said on Tuesday that while food inflation remained high, aside from that there was a broadly more positive trend.
“The slowdown in services inflation, which began significantly in October, continued in November. The decline in the contract renewal rate also contributed to the decrease in monthly rent inflation. We expect the downward trend in rent price increases to continue, positively impacting services group inflation,” Yılmaz wrote on X.
He said unprocessed food inflation remained high due to temporary supply conditions but noted that non-food monthly consumer inflation had shown a more favorable trend.
The Turkish lira was little changed after the data at 34.7505 to the dollar, having earlier touched a record low.
Economists had flagged medicine prices as an inflation driver in November since the government late last month hiked by 23.5% the euro rate for imported medicines.
Cost pressure easing
The domestic producer price index was up 0.66% month-over-month in November for an annual rise of 29.47%, according to the data.
Yılmaz said the moderate trend in domestic producer prices indicated that cost pressures on consumer prices are gradually easing.
“The improvement in firms’ pricing behavior positively reflects on consumer inflation,” he added.
“Increased confidence in the disinflationary policies contributes to improved inflation expectations alongside the decline in inflation.”
Yılmaz said the government expects the disinflation process to continue in the coming months.
“We will persist in our multi-dimensional, coordinated, and determined fight against inflation until we reach single-digit figures again.”
Earlier this month, the central bank raised its year-end inflation forecasts for this year and next to 44% and 21%, respectively. It previously forecast year-end inflation of 38% in 2024 and 14% next year.
The government anticipated end-2024 and end-2025 inflation of 41.5% and 17.5%, respectively. But Şimşek last week said the year-end figure would come in above their expectations and be around 44%-45%.
