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Turkey’s inflation tops 75% but economy czar says 'worst is over'

Finance and Economy Minister Mehmet Simsek has said that inflation will begin dropping from June.
A teller counts US dollar bills at an exchange office in Ankara, Turkey, July 20, 2023.

ANKARA — Turkey's annual consumer inflation rate exceeded 75% in May, the highest in the past 18 months, according to official data released on Monday. However, Turkey’s Finance and Economy Minister Mehmet Simsek sought to reassure the public and international investors, saying the “worst is over.” 

The year-on-year inflation, which surged last month to 75.45%, was driven primarily by rising prices in the education, housing and restaurant sectors, according to data released by the Turkish Statistical Institute. Year-on-year inflation was 39.59% in May 2023. This May was Turkey's highest year-on-year inflation since November 2022, when it reached a high of 84.38%.

Meanwhile, the year-on-year inflation in April stood at 69.8%. This figure marked a significant increase from April 2023, when year-on-year inflation was 46.68%.

Month-on-month inflation, meanwhile, came in at 3.37%, slightly higher than the previous month's figure of 3.18%. 

After May's inflation figures were released Monday, Simsek insisted the “worst is over.” 

“We saw the highest level of annual inflation this month. So, the transition period in the fight against inflation is completed and we are entering the disinflation process,” Simsek wrote on the X platform, following the release of the data. 

He predicted that the permanent decline in inflation would begin in June and that annual inflation will most likely fall below 50% by the end of the third quarter of 2024.

The peak in annual inflation was expected according to Turkey’s Central Bank projections, which forecast a 38% year-end rate. The bank raised its year-end projections from 36% to 38% earlier this month. The bank's year-end target for 2025 remained at 14%.

For years, Turkey under President Recep Tayyip Erdogan held unorthodox economic policy of keeping interest rates stubbornly low despite high inflation. Erdogan returned to economic orthodoxy after the May 2023 general elections, with the central bank hiking interest rates from 8.5% to 50% in an aggressive rate hike run between June 2023 and March 2024. 

The bank kept the rates steady at 50% in April and May, but vowed to resume monetary tightening in case of a deterioration in the inflation outlook.