Experts interpret the April inflation

consumer price index (CPI) monthly increased by THE

2.39% in April, below the market expectation of 2.6%, according to the Turkish Statistical Institute (TurkStat). The annual inflation, which hit 50.51% in March, reached 43.68% last month. Thus, the annual inflation, which continued to decline in April due to the high base effect, fell below 50% for the first time after January 2022. The rapid decline will continue in the coming months and annual inflation will fall to a lower level this year, according to Treasury and Finance Minister Nureddin Nebati. “The decline in headline inflation and ongoing decrease in the difference between the CPI and the Domestic Producer Price Index (D -PPI) positively affect inflation forecasts,” Nebati said.

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We face persistent inflation, which has rigidized at a high level. The decrease in headline inflation stemmed from the unexpected deflation in housing caused by the decline in energy prices and the slowdown in prices of furnishing and household equipment. However, the monthly increase is still high in food, clothing, footwear, education, restaurants and hotels, and communication groups. The monthly price hikes, which approach the average of the last five years, are above the average of the last 10 years. The general trend points to a 2.5-3% rigidity in the seasonally adjusted series. Yet, the annual headline inflation will continue next month due to the high base effect and natural gas price cut. We expect the headline inflation to fall by nearly 2 points to 42% for May.

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Food made the highest contribution to inflation, while the price cut in electricity used by homes limited it in April. The decline in energy prices also limited the prices of the goods. In addition to the hike in food prices, the ongoing impact of the resilient demand for some products and the minimum wage hike continued in April. The cut in residential electricity prices and decrease in petroleum prices limited the headline inflation, while the seasonal price adjustments in clothing were below previous years. We expect the headline inflation to have a moderate course due to measures for some food products and low energy prices and the annual inflation to continue to decrease due to the base effect in May. But we also estimate the rigidity in FX rate hikes, pricing behaviors, and forecasts to restrict the recovery in the base dynamics.