The Turkish Central Bank remains steadfast in its commitment to curb inflation, according to Governor Fatih Karahan. In an exclusive interview, Karahan emphasized the bank’s determination to manage inflation, despite a slight decrease in annual rates from 75% in May to below 72% in June. “We still have some way to go,” Karahan stated, indicating that a rate cut was not on the immediate horizon.
The central bank’s hawkish stance aims to reassure markets and the public of its stringent monetary policies designed to stabilize the Turkish economy amidst high inflation pressures. Official data released by the Turkish Statistical Institute on Wednesday revealed that annual consumer price inflation fell to 71.60% in June, primarily driven by increases in education, housing, and restaurant prices. This figure fell below expectations, with month-on-month consumer price inflation at 1.64%, compared to 3.37% in May.
Economists polled by Reuters had predicted annual inflation would drop to 72.6% in June, down from May’s high of 75.45%, the highest level since November 2022.
Curbing inflation commitment
They forecast that inflation could decrease further to 42.6% by the end of 2024.
In Istanbul, Türkiye’s largest city, retail inflation rose 3.42% month-over-month in June, led by price gains in housing, transportation, and communication, according to the Istanbul Chamber of Commerce (ITO). Retail prices climbed to an annual 82.14%, with monthly and annual gains lower than the 3.59% and 82.2% registered in May. The data suggests that price growth could start cooling after peaking in May, due to aggressive interest rate hikes and a relatively stable Turkish lira.
Housing prices in Istanbul surged by 8.01% on a monthly basis, while transportation and communication costs rose by 4.06%, and food prices climbed by 2.66% from May. Wholesale prices in Istanbul increased by 3.85% month-over-month for an annual rise of 60.49%, with leading contributors including chemical products, textiles, and raw materials. Türkiye’s central bank estimates that inflation will be 38% this year and has implemented aggressive monetary tightening since June last year, gradually lifting its benchmark policy rate to 50% from 8.5%.
The bank has stated it would “do whatever it takes” to prevent the inflation outlook from deteriorating.
