Monthly inflation to slow after ticking up next month: Central Bank

ISTANBUL

Monthly inflation will rise in January due to wage adjustments, particularly the minimum wage, and items with a high tendency for time-dependent price setting, the Central Bank has said.

The minimum wage this week was increased by 49 percent to 17,002 Turkish Liras ($578) for millions of workers.

“This rise in monthly inflation is expected to slow down in February and beyond, and hover close to the decline in the underlying trend of inflation in the first half of the year,” the bank said in the summary of the November Monetary Policy Committee Meeting released on Dec. 28.

Recent indicators suggest that domestic demand continues to moderate as monetary tightening is reflected in financial conditions, it added.

“While the trend of imports weakens, the foreign trade balance displays a relatively favorable outlook. On the other hand, discounts and campaigns, in particular, have been the factors curbing the decline in demand.”

Although the rebalancing that started with the monetary tightening process continues, demand conditions may not weaken due to wage hikes in January, said the bank, warning that the current level of demand continues to be considered a risk factor in inflation.

Meanwhile, some business associations voiced concern over the potential impacts of higher wages.

The wage hike will be reflected in the prices in the coming months, said Sinan Öncel, the president of the United Brands Association (BMD).

The effects of the hike in the minimum wage will be felt particularly in the labor-intensive industries, such as textile and garments, according to Güven Karaca, the chair of Istanbul Leather and Leather Products Exporters’ Association (İDMİB).

He, however, welcomed the decision that there would not be another wage adjustment. “The one-off increase will help businesses see how their costs will change,” Karaca explained.