Turkish monthly inflation climbed to 3 per cent in April, data showed on Monday, partly due to a plunge in the value of the lira following the arrest of President Tayyip Erdogan’s main political rival a month earlier.
In a Reuters poll, the monthly inflation rate was expected to climb to 3.1 per cent in April on the back of energy prices and FX pass-through, with the annual rate seen sliding to 38 per cent. It came in at 37.86 percent.
Education, housing and restaurant prices led the rise in the annual print while clothing, housing and transportation added to the monthly inflation, according to Turkey’s statistics institute.
In March, the Turkish lira and assets suffered after Istanbul Mayor Ekrem Imamoglu – Erdogan’s main political rival – was jailed over graft charges pending a trial. The currency later recovered some losses but still stood some 5 per cent weaker compared to before the incident.
Economists have said that food prices and energy prices as well as prices of items that are directly impacted by currency volatility could impact April inflation due to the recent shakeup in the market.
In March, inflation stood at 2.46 per cent on a monthly basis and 38.1 per cent annually.
The central bank tightened its policy rate by 350 basis points, set the lending rate at 49 per cent and sold some $50 billion in foreign reserves in the wake of the mayor’s arrest, data shows. The moves amount to 700 basis points of policy tightening since the arrest to counter market volatility.
Before that, the central bank had begun an easing cycle and gradually cut its policy rate to 42.5 per cent as inflation fell from the level of more than 75 per cent that it reached in May 2024.
Although market volatility mid-March caused some deterioration of inflation expectations, the government said the impact of the turmoil is temporary and limited and inflation will be in line with the central bank’s target range.
Burumcekci Research & Consultancy said in a note that in the near term, monetary policy will be shaped by risks to financial stability rather than price stability.
“While we see a low probability that the central bank will return to rate cuts at its June meeting, we think that signals in this direction will only strengthen if the weighted average funding cost approaches 46.0 per cent and substantial foreign-exchange reserve losses give way to steady reserve accumulation.”
The domestic producer price index rose 2.76 per cent month-on-month in April for an annual rise of 22.5 per cent, the data showed.