Turkey releases official November inflation slightly up at 62% y/y

Turkey releases official November inflation slightly up at 62% y/y
*ENAG is an Istanbul-based inflation research group of economists who calculate independent readings of Turkish inflation. / bne IntelliNews
By Akin Nazli in Belgrade December 4, 2023

Turkey’s consumer price index (CPIinflation officially stood at 62% y/y in November versus 61% y/y in October and 38% y/y in June, the Turkish Statistical Institute (TUIK, or TurkStat) said on December 4 (chart).

At 62%, Turkey remains in sixth place in the world inflation league. Turkey’s closest 'rival' is Sudan, which released a 63% y/y inflation rate for February (the latest data provided).

The Istanbul-based ENAG inflation research group of economists, meanwhile, calculated a Turkish inflation figure of 129% y/y for November. The ENAG figure calculated for October was 126% y/y, while for June it was 109% y/y.

TUIK also gave an official figure of 42% y/y for producer price index (PPI) inflation in October.

Following the national elections held in May, 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 still ongoing, bringing the policy rate to 40% in November from 8.5% in June.

The next monetary policy committee (MPC) meeting is scheduled for December 21. As things stand, it seems the rate-setters will bring in a 250bp cut at that meeting.

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 currently anticipates that official inflation may peak in the 75-80% range in May 2024, up from the 70% projection given in July.

On February 8, the central bank will release its next inflation report and updated inflation forecasts.

Looking at the global markets, a positive sentiment prevails. The expected new year rally should begin soon. Through February, the positivity may sustain.

Turkey’s five-year credit default swaps (CDS) remain below the 400-level, while the yield on the Turkish government’s 10-year eurobonds remains below the 9%-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 December 3, is 29.1292.

Since November 27, the Turkish government has scrapped its ‘five/10 kurus (Turkish cents, pronounced as kurush) devaluation per day policy’. It has been again been aiming to draw a straight line at around the 28.90-28.95-levels. The annual rise in the USD/TRY pair remains at 55%.

Following the local elections to be held in March, Turkey’s policy rate will reach its peak. The finance industry will then be welcomed in for the rate-cutting feast. Double returns from the rising prices of lira papers and lira appreciation will be written.