ANKARA — Annual inflation in Turkey hit 47.83% in July, with consumer prices increasing 9.49% from the preceding month, official data released on Thursday showed.
The Turkish Statistical Institute reported that annual inflation jumped by nearly 55% compared to the same period last year. The increase came after consecutive price and tax hikes as the country grapples with one of its worst-ever cost-of-living crises.
Following the release of the data, Mehmet Simsek, Turkey’s new finance and treasury minister, said the increase was in line with market expectations.
“We are in a transition period targeting disinflation and price stability,” Simsek tweeted. “Annual inflation will start to decline as of mid-2024.” He also reiterated his pledge to tighten fiscal and monetary policies.
Mali tedbirler, döviz kuru gelişmeleri ve ücret artışlarının etkisiyle enflasyon Temmuz’da yıllık yüzde 47,8 ile piyasa beklentileriyle uyumlu gerçekleşti.
Dezenflasyon ile fiyat istikrarının hedeflendiği bir geçiş sürecindeyiz.
Para politikası duruşunun olumlu etkisiyle 2024…
— Mehmet Simsek (@memetsimsek) August 3, 2023
The data released Thursday showed transportation to be the main driver of increasing consumer prices, rising 17.75% above the previous month's figures, in part due to multiple fuel hikes.
The second-highest monthly increase was in healthcare costs, which grew by nearly 13.61%, followed by a 11.92% increase in restaurant and hotel prices.
Before the July jump, the country’s annual consumer inflation rate had been on the decline since November, after peaking at a 24-year high of 85.5% in October. The Thursday data marks the end of the downtrend.
Under new administration, Turkey’s Central Bank last week revised its year-end annual inflation projection from 22.3% to to 58%, citing impacts of Feb. 6 earthquakes, shrinking Turkish exports and tightened monetary policies.
Turkish President Recep Tayyip Erdogan, abandoning his long-standing, unconventional economic approach—arguing that raising interest rates cause higher inflation — shifted to adopt orthodox monetary policies after his reelection in May and appointed mainstream economists at the helm of the economy.
Both Finance Minister Simsek and Central Bank Governor Gaye Erkan pledged to return to conventional policies following their appointments.
In a U-turn in monetary policy under Erkan’s tenure, which began in June, Turkey’s Central Bank dropped its controversial policy of keeping interest rates low and raised rates by 900 basis points in successive hikes, in June and July, from 8.5% to 17.5%.
After the shift to rational economic and monetary policies, Turkey’s risk premium — the cost of insuring exposure via credit default swaps (CDS) — fell below 400 basis points, down from more than 700 basis points in May.
Rasyonel politikalar meyvelerini vermeye devam ediyor…
Mayıs ayında 700 baz puana yükselen CDS’ler (risk primi - Türkiye'nin dolar cinsinden kredi iflas riskini gösteren beş yıllık kredi temerrüt takası) bugün 400 baz puanın altını gördü. pic.twitter.com/ci7uo43ORd
— Mehmet Simsek (@memetsimsek) July 28, 2023
Previous insistence on keeping interest rates in single-digit territory despite the Turkish lira sinking to historic lows against hard currencies further fueled the country's breakneck inflation.