A tram passes shoppers as it travels along Istiklal Street in the Beyoglu district of Istanbul, Turkey, on Tuesday, December 19, 2023.
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Data released by the Turkish Central Bank on Monday showed that Turkey’s inflation rate in January hit the largest monthly increase since August, rising 6.7% from December, and the year-on-year inflation rate was close to 65%.
The country of 85 million people’s consumer price index rose at an annual rate of 64.86%, slightly higher than December’s 64.77%. The industries with the largest monthly price increases were healthcare, which rose by 17.7%, hotels, cafes and restaurants, which rose by 12%, and miscellaneous goods and services, which rose by more than 10%. Clothing and footwear was the only industry to see a monthly price decrease, with a decrease of -1.61%.
Food, beverages and tobacco and transportation are both up about 5% to 7% from the previous quarter, while housing is up 7.4% since December.
Economists said the monthly increase stemmed from significant Raise the minimum wage This is the minimum wage set by the Turkish government for 2024. This year’s minimum wage has risen to 17,002 Turkish lira ($556.50) per month, a 100% increase from January 2023.
The Central Bank of Turkey has long been committed to reducing inflation and has raised interest rates eight times in a row since May 2023, with a cumulative increase of 3,650 basis points. The bank made its latest rate hike on January 25, raising the key rate by 250 basis points to 45%.
The more traditional approach follows years of unorthodox policies, during which Ankara refused to tighten interest rates despite swelling inflation. The lira has fallen 38% against the dollar so far this year and has lost more than 80% of its value against the dollar over the past five years.
The latest inflation report comes just days after Turkey’s central bank governor Hafez Guy Erkan announced her resignation, a decision she said on Friday was due to a “reputational assassination” campaign and the need to protect her family.
In June 2023, Elkann became the central bank governor by presidential decree and, together with Turkish Finance Minister Mehmet Simek, led the shift in Turkey’s monetary policy and the subsequent series of interest rate hikes.
Turkish Central Bank Governor Hafize Gaye Erkan answers questions during a press conference on the 2023-III Inflation Report in Ankara, Turkey, July 27, 2023.
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She was replaced on Saturday by central bank deputy governor Fatih Karahan, who spent nearly a decade as an economist at the New York Fed.
Liam Peach, senior emerging markets economist at London-based Capital Economics, wrote in a research note that January’s inflation data “highlights the impact of services sector inflation.” Continued strength and may put pressure on the new central bank governor Callaham to restart the central bank’s tightening cycle.”
“Given the uncertainty over the impact of the minimum wage increase, the fact that inflation did not rise significantly more than expected in January is positive,” Peach wrote. “But the data represent a small setback to the deflationary process and are This highlights the continued strength of service sector inflation. Currently, the central bank’s year-end inflation forecast of 36% remains unchanged.”
