Turkey's official inflation edges down to 61% y/y in October

Turkey's official inflation edges down to 61% y/y in October
*ENAG is an Istanbul-based inflation research group that calculates alternative readings of inflation in Turkey. / bne IntelliNews
By Akin Nazli in Belgrade November 4, 2023

Turkey’s official consumer price index (CPIinflation stood at 61% y/y in October versus 62% y/y in September and 38% y/y in June, the Turkish Statistical Institute (TUIK, or TurkStat) said on November 3 (chart).

At 61%, Turkey is 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 126% y/y for October. The ENAG figure calculated for September was 130% y/y, while for June it was 109% y/y.

TUIK also gave an official figure of 39% y/y for producer price index (PPI) inflation in October.

Following the 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 central bank's monetary policy committee (MPC) launched its ongoing tightening process, taking the policy rate to 35% in October from 8.50% in June.

The next MPC meeting is scheduled for November 23. As things stand, it seems another 500bp is on the way.

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 at just below the 80%-level in May 2024, up from the 70% projection given in July.

Chart: The central bank’s inflation expectations.

The chart shows that the upper reach of the prediction interval could approach the 80%-level, while central bank governor Hafize Gaye Erkan said during her press conference that the official inflation series would peak at 70-75% in May.

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

Looking at the global markets, there is no turbulence of note impacting sentiment. The US Treasury yields, which were sailing through the 6%s across the curve, are currently taking a breather around the 5%-level.

The USD Index (DXY) fell into the 105s after pushing through the 107-level, still up from the 99s seen in July.

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 November 3, is 28.5666.

The Turkish government’s ‘five/10 kurus (Turkish cents, pronounced as kurush) devaluation per day policy’ in the struggle to stop the slide is still in place. As of November 3, the latest daily trench was dug around the 28.40-level, up 3% m/m and 52% y/y.

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 party.