Türkiye’s annual inflation exceeded expectations and jumped to above 67% in February, official data showed on Monday, maintaining pressure for tight monetary policy amid strong rises in food, hotel and education prices.
Measured in the consumer price index (CPI), inflation surged to 67.07% over 12 months ending in February, the Turkish Statistical Institute (TurkStat) said.
Shortly before the data, Treasury and Finance Minister Mehmet Şimşek said annual inflation would remain high in the coming months due to base effects and the delayed impact of rate hikes but would fall in the next 12 months.
In January, annual consumer price inflation was 64.86%.
The Turkish central bank has hiked rates by 3,650 basis points since last June but has now paused its tightening cycle, saying that the current 45% policy rate is sufficient to bring down inflation.
Yet, some economists see a growing prospect of more tightening sometime after nationwide local elections on March 31, given the price pressure and strong domestic demand.
“Core price pressures continue to run hot, and if this continues, the possibility of a restart to the central bank’s tightening cycle will only increase in the coming months,” said Capital Economics senior emerging markets economist Liam Peach.
Month-over-month, consumer price inflation came in at 4.53%, according to the TurkStat data, easing from 6.7% in January.
“Inflation was high in January due to temporary effects. There could be some continuation of that in February,” Şimşek said. “However, as of March, inflation will be back on trend. It will become in line with our disinflation path.”
The Turkish lira has been relatively stable since last year’s May presidential and general elections, followed by a reshuffle in the Cabinet and a reversal to more conventional policymaking.
The currency has weakened by about 6% this year after a nearly 37% drop in 2023. It was slightly weaker at 31.4205 against the dollar after the inflation data.
The essence of the government’s medium-term program, unveiled in September, “is to bring inflation down to single digits,” Şimşek said. “Currently, we are far from price stability, but that is our target.”
The minister stressed monthly inflation would be “back on trend as of March.”
Though some analysts predict currency weakness after the elections – in which President Recep Tayyip Erdoğan’s ruling Justice and Development Party (AK Party) seeks to reclaim big cities from the opposition – Şimşek said authorities want neither a depreciating nor very valuable lira.
Last month, the central bank maintained its 36% year-end inflation target and vowed to keep policy tight for longer to bring inflation down to the forecasted path.
Restaurants and hotels led the price rises in February, surging 94.5%, followed by a 91.8% rise in education prices. Heavily weighed food and nonalcoholic drinks prices jumped 71.1%.
Economists have said that February inflation was also driven by the lingering impact of this year’s nearly 50% minimum wage hike on the services sector.
The domestic producer price index was up 3.74% month-over-month in February for an annual rise of 47.29%, the data showed.
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