Türkiye vows action as inflation hits 68.5%

The consumer price data came in below expectations, with Finance Minister Mehmet Şimşek saying that recent monetary and fiscal tightening would help anchor inflation expectations and support disinflation

INFLATION in Türkiye rose less than expected in March but still gathered momentum, according to official data yesterday that confirmed price gains remain the biggest challenge, which proved to be among the key factors during the nationwide local elections over the weekend.

Consumer prices rose 68.5% compared with a year earlier, above February’s 67.07% annual pace, the Turkish Statistical Institute (TurkStat) said. Shortly after the data release, Treasury and Finance Minister Mehmet Şimşek said recent monetary and fiscal tightening would help anchor inflation expectations and support disinflation.

The increased reading followed Sunday’s municipal elections, which placed the ruling Justice and Development Party (AK Party) behind the main opposition, the Republican People’s Party (CHP), for the first time ever. Many blamed the outcome on the soaring costs of living.

Prices rose 3.16% from February to March, TurkStat said, below market forecasts and lower than 4.53% and 6.7% in the previous two months as fallout from wage hikes and other administered price rises at the start of the year faded.

Pointing to the slowing month-over-month reading, Şimşek said that “monthly inflation decreased in line with our forecast” and reiterated the government’s determination to ensure price stability.

Both government and analysts say inflation is likely to continue rising through mid-year before entering a steep downward trend in the second half.

The annual rate was expected to be 69.1% in March and the monthly rate 3.5%, a Reuters poll showed. The survey expects the annual reading to fall to about 44% by year-end.

The central bank sees it at 36% after peaking at around 75% in May.

In an Anadolu Agency (AA) poll, economists’ average expectations for monthly inflation were 3.67%. The median estimate of 20 economists for the annual rate was 69.32%.

President Recep Tayyip Erdoğan called the electoral setback a “turning point” and stood by the current economic policies, which he says will yield positive results.

Addressing an AK Party meeting on Tuesday, Erdoğan acknowledged that high inflation greatly impacted voter behavior, according to a readout from the party sources.