Annual inflation rate accelerates to 58.9 percent

ANKARA

Consumer prices rose more than expected in August, bringing the annual inflation rate from 47.8 percent in July to 58.9 percent, according to data from the Turkish Statistical Institute (TÜİK).

“We are absolutely determined to fight inflation,” Treasury and Finance Minister Mehmet Şimşek said after TÜİK released the data on Sept. 4.

“We know that the fight against inflation will take some time. We are in the transition period. We will do whatever is necessary - monetary tightening, credit policy and income policies - to bring inflation under control and then lower it,” Şimşek wrote on X.

Economists expected consumer prices to advance by 7.3 percent last month from July, which should have pushed the annual rate upward to around 56.4 percent.

Transport costs climbed 16.6 percent in August from July, while food and non-alcoholic beverage prices rose by 8.5 percent, for an annualized increase of 72.9 percent.

Clothing prices increased by 8.3 percent month-on-month, while housing prices were up 6.7 percent, which brought the annual rise to around 25 percent. Communication costs rose 4.3 percent last month compared with July.

Health and restaurant prices advanced 7.98 percent and 7.1 percent month-on-month, respectively, according to the TÜİK data.

Rate hikes

The Central Bank has been raising its key policy rate to support the fight against inflation.

The bank has hiked the one-week repo auction rate by a cumulative 1,650 bps since June. Last month alone, it delivered a larger-than-expected 750pbs hike in the policy rate to 25 percent.

“We will begin to feel some of the cumulative positive effects of our rate hike decisions, along with our quantitative and selective tightening decisions in late 2023 and particularly in the underlying trend of inflation in the second quarter of 2024,” Central Bank Governor Hafize Gaye Erkan said in July in a speech at the presentation of the Inflation Report. 

Erkan took the helm at the Central Bank in early June after the May elections.

In the minutes of the latest rate-setting meeting in August released last week, the bank said that inflation will hover close to the upper bound of the forecast range - 62 percent - in the Inflation Report and then, given the monetary tightening stance, disinflation will be established in 2024.