Turkish Inflation Slowed More Than Expected in December
Turkey’s inflation rate dropped to 44.4% in December, easing pressure on the central bank to cut interest rates further
Turkey, Inflation, Interest Rates, Erdogan, Economy
Turkey: So, guess what? Inflation in Turkey took a surprising dip last month. It fell to 44.4% in December, down from 47.1% in November. Analysts were expecting it to be a bit higher, around 45.2%. Pretty interesting, right?
The central bank’s favorite measure, month-on-month inflation, also dropped to 1.03%. That’s a nice change from the 2.24% we saw in November. It seems like the central bank might have a little breathing room to cut interest rates again.
Just recently, on December 26, the central bank made a big move by cutting rates for the first time in almost two years. They lowered the benchmark one-week repo rate by 250 basis points, which was more than what everyone was expecting. But they’re still playing it cautious, keeping a close eye on future moves.
Many economists think the central bank will keep lowering rates by 250 basis points in the upcoming meetings. The next one is set for January 23, so we’ll see what happens then.
Turkey has been dealing with some of the highest inflation rates in the world for years. A lot of it has to do with President Erdogan’s push for a super-loose monetary policy to boost growth. But things started to shift in mid-2023 when the central bank, under new leadership, began raising rates quickly. Inflation has come down from over 75% back in March.
Erdogan, who’s been pretty quiet about monetary policy lately, mentioned that rates would “definitely” be reduced in 2025. This could put more pressure on the central bank to ease up even more. Many business leaders in Turkey are saying that rates are still too high, and the economy even slipped into a technical recession in the third quarter.
How prices behave in the early months of this year will be key in deciding how much the central bank cuts rates. Some recent government moves, like raising the minimum wage by 30% for this year, might help support the central bank’s goals.
We’ll also get to see the seasonally-adjusted prices soon, which are closely watched by policymakers. So, stay tuned!