Turkey’s consumer price index (CPI) inflation officially stood at 64.86% y/y in January versus 64.77% y/y in December and 38% y/y in June, the Turkish Statistical Institute (TUIK, or TurkStat) said on February 5 (chart).

It would be an interesting world if macro data methodologies were assay balances able to measure microscopic changes on a digit basis. TUIK’s reliability is another issue. As it always does in the first month of the year, the institute has also updated its inflation basket (click on "Table-6 CPI methodological notes" in the list of tables to the right).

TUIK also posted 7% m/m official inflation for January. Turkey’s finance minister, Mehmet Simsek, said in a tweet that TUIK will release significantly lower monthly inflation rates starting from February.

At 65% y/y, Turkey remains in fifth place in the world inflation league.

The Istanbul-based ENAG inflation research group of economists, meanwhile, calculated a Turkish inflation figure of 129% y/y for January. The ENAG figure recorded for December was 127% y/y, while for June it was 109% y/y.

TUIK also gave an official figure of 44% y/y for producer price index (PPI) inflation in December.

Following the national elections held in May last year, another wave of currency depreciation coupled with widespread tax hikes dynamited pricing behaviour in the country once again.

In June, following the appointment of Turkey’s post-election new economic team, the Erdogan regime launched a tightening process that is ongoing. It brought the policy rate to 45% in January from 8.5% in June.

On January 25, the monetary policy committee (MPC) announced its latest rate hike, amounting to 250bp.

The MPC assessed that the monetary tightness required to establish a disinflation course had been achieved.

It also stated that the current policy rate level would be maintained until there was a significant decline in the underlying trend of monthly inflation.

In the period ahead, the authority will keep employing macroprudential measures and non-capital controls to strengthen the monetary transmission mechanism.

The next MPC meeting is scheduled for February 22. As things stand, the rate-setters look set to stick with the 45% benchmark.

Meanwhile, many in the finance industry have been campaigning for additional rate hikes. New central bank governor Fatih Karahan has been hailed as more "hawkish". So, he is expected to bring in some additional rate increases. Whether the campaign for this will bear fruit will be watched closely.

On November 2, the central bank hiked its forecast for end-2023 official inflation to 65% from the 58% given in the July inflation report. Also, the upper boundary was moved up from 62% to 68%.

Moreover, the central bank anticipated that official inflation may peak in the 75-80% range in May this year, up from the 70% projection it gave last July.

The authority sees official inflation at 36% at end-2024.

On February 8, Karahan will release his first inflation report and the central bank’s updated inflation forecasts.

The global markets are not suggesting turbulence. Turkey’s five-year credit default swaps (CDS) remain above the 300-level, while the yield on the Turkish government’s 10-year eurobonds remains below the 8%-level.

The USD/TRY rate is, meanwhile, still heading north. On September 21, the pair once again broke through the horizontal barrier set at the 27.00-level. The latest record high, registered on February 5, is 30.7049.

Since December 15, the Turkish government has returned to its ‘five/10 kurus (Turkish cents, pronounced as kurush) devaluation per day policy’. As of February 5, the daily tranche was being dug at around the 30.55-level. The annual rise in the USD/TRY pair rose to 62%.

Following the local elections to be held at the end of March, with Turkey’s policy rate at its peak, the course of the USD/TRY pair will be observed.

When the northward pull on the pair ends, the moment will be seen as signalling the beginning of portfolio inflows and the opening of the window for slowly building up lira papers.

Ahead of May, when official inflation will peak, the beginning of rate cuts (currently expected by many analysts in 4Q24) will be discussed.