Turkey’s Inflation Surpasses 75%, Economists Expect Peak

Record Inflation Rates

According to the Turkish Statistical Institute, consumer prices increased by 75.45% on an annual basis and 3.37% on a monthly basis in May. The sectors experiencing the steepest annual price hikes were education at 104.8%, housing at 93.2%, and hotels, cafes, and restaurants at 92.9%.

Economists had predicted that inflation in Turkey, a country with a population of 85 million, would peak around 75%. The central bank’s yearlong policy of steadily increasing interest rates has been aimed at curbing these rising prices, though it has led to significant financial hardships for many Turkish consumers.

Central Bank’s Stance

Turkey’s central bank has maintained an interest rate of 50% since March, with the aim of controlling the climbing inflation. The bank stated that this "tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed."

Despite the efforts, the month-on-month CPI increase of 3.4% in May was higher than in both March and April. This unexpected rise has led some analysts to question the ease of the anticipated disinflation.

Future Outlook

“We’re confident that inflation has now reached a peak but, with today’s release containing a few unpleasant surprises, the pace of disinflation in the second half of the year is looking a bit more uncertain,” Liam Peach, senior emerging markets economist at London-based Capital Economics, wrote in a research note. Capital Economics had previously expected inflation to ease to 41% by year-end, while the Turkish central bank forecast it would reach 38% by then.

Given the current pace of inflation acceleration, it “may now end the year slightly higher,” Peach added, suggesting that an extended pause in interest rates is likely. Economists are divided on whether Turkey’s central bank will cut interest rates by the end of this year or wait until 2025.

Impact on Consumers

The rising inflation has put immense pressure on Turkish consumers, leading to increased costs in essential sectors such as education, housing, and dining. The government and the central bank continue to grapple with finding effective measures to stabilize the economy and bring relief to its citizens.