Turkey's inflation moves up to 62% in November and that's a relief

Turkey’s annual inflation rate in November experienced a slight increase, reaching 61.98 per cent compared to 61.36 per cent in October, as reported by the state statistics agency TUIK on Monday.

This indicates a stabilisation trend following several significant interest rate hikes. The consumer price growth, which had seen a steady increase over six consecutive months of rate hikes, began to moderate after the borrowing cost surged from 8.5 per cent to 40 per cent.

Analysts anticipate a final rate hike of 2.5 percentage points at the central bank’s upcoming policy meeting on December 21, with expectations of a stable policy rate in the early part of next year. The recent data suggests that higher borrowing costs are starting to have a decelerating effect on consumption, aligning with the central bank’s objectives.

Turkey’s gross domestic product rose by just 0.3 per cent between July and September. It had risen by 3.3 between April and June. Signs of Turkey’s economy starting to emerge from the crisis are starting to be noticed by foreign investors who had pulled out of the market because of President Recep Tayyip Erdogan’s unpredictable past policies.

A Reuters poll had showed that annual inflation was expected to rise to 63% in November before ending the year at 67%. In October, annual inflation had dipped for the first time in three months to 61.36%.

Signs of Turkey’s economy starting to emerge from the crisis are starting to be noticed by foreign investors who had pulled out of the market because of President Recep Tayyip Erdogan’s unpredictable past policies.

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Analysts blame Erdogan for setting off the inflation spiral by forcing the nominally independent central bank to slash borrowing costs far below the rate at which prices were rising.

The official annual inflation rate peaked at 85.51 per cent in October 2022. Standard & Poor’s revised Turkey’s long-term sovereign credit rating to positive from stable last month.

“Inflation appears to have peaked, albeit at elevated levels of over 60 per cent,” the rating agency said. But it also warned that “the policy reset will take at least two years to tame inflation”.

Turkey’s central bank expects inflation to peak in May of next year at between 70 and 75 per cent.

With inputs from agencies.