Turkey’s annual Consumer Price Inflation has also declined significantly with current figures reaching forty-nine and fifty-one. , 97 percent in August, local media reported on Tuesday citing the Turkish Statistical Institute. This decline which is slightly above the forecasted level brings the inflation rate down further starting from May this year largely due to base effect and lower food inflation.
On a month-on-month basis, the consumer price index (CPI) rose by 2. Of that, 47% in August was below the anticipated rate, partly because of the recent increase in gas prices. By way of comparison, inflation of the monthly CPI in July was recorded at 3.23 percent also its annual growth rate is at 61 percent 78%.
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Why Turkey Reduced Inflation Rate in August 2024?
The annual inflation rate was mainly caused by the rise in prices for education which increased 2.5 times or by 121 % and housing with an increase of 2 times or 101%. Nevertheless, these increases were much compensated by the category food and nonalcoholic beverages which recorded a 45% increase.
In a Reuters poll, economists expected annual inflation to drop to 52.2% as compared to August with month on month-on-month increase expected at 2 %. 64%. The same poll said that inflation would decrease to 42.95% by December 2024.
In this paper, the roles of Turkey’s recent gas price increase on the overall inflation will be discussed and analyzed.
Realizing what was ailing the inflation picture, there was a considerable shift in natural gas prices. The unit price for residential natural gas was raised by 38% in August which is the first time that this factor was raised since August 2019.
Central Bank’s Response: Will Turkey Get A Rate Cut?
Since June last year to the present time, Turkey’s central bank has hiked up interest rates to 50 percent, increasing the rate by 4,150 bps. Currently, the bank has promised the public to increase the measures of tightening monetary should inflation decline further. But, based on this recent disinflation trend, many analysts are expecting the BSP to make a rate cut by November or December at the earliest.
Current Trend of Turkish Lira and Producer Price Index
Certainly, the Turkish lira has come under significant selling pressure and declined by nearly 3% in August to reach new lows in the last few days against the US dollar. Consequently, measures were contemplated by the central bank last Thursday to facilitate demand for the local currency by meddling with the concept of required reserves.
On the other hand, the domestic producer price index (PPI) rose by 1 percent. Month-on-month increase in August was 68% resulting in an annual increase of 3575%.
Such an environment of continuous inflation creates serious challenges for Turkey, and the forthcoming monetary policy decisions attract the attention of domestic and global audiences.
