Turkey's annual inflation rate continued its downward trend for the eighth consecutive month, falling to 42.12 percent in January. However, despite this decline from December's 44.38 percent, monthly inflation reached 5.03 percent, exceeding market expectations of 4.35 percent. This increase was attributed to a significant minimum wage hike and adjustments to prices at the beginning of the year.
The Turkish Statistical Institute (TurkStat) reported that the education, housing, and health sectors experienced the largest price increases on a monthly basis. Public and private hospital fees for health services rose by 233 percent and 543 percent, respectively, contributing to a 23.6 percent increase in health prices.
Officials explained that the higher-than-expected monthly inflation was primarily due to seasonal factors. However, they emphasized that price management, aligned with set targets, had resulted in January's lowest monthly inflation rate in four years. The Minister of Treasury and Finance expressed confidence that inflation would continue to decline, citing implemented policies and demand balancing through supply-focused measures.
Economists anticipate a further interest rate cut by the Central Bank of the Republic of Turkey (CBRT) of 250 basis points in March. This prediction is contingent on inflation staying within the CBRT's expected limits. If inflation exceeds these projections, the rate-cutting cycle could be slowed or even halted.
Concerns about a potential slowdown in interest rate cuts amid a global market sell-off triggered by US tariffs led to a decline in Turkish bank stocks on Monday. Analysts attributed this drop to uncertainties surrounding the interest rate reduction process and heightened inflation concerns.
The government forecasts that inflation will continue its downward trajectory and reach around 20 percent by the end of the year. This optimistic outlook aligns with its commitment to disinflation, illustrated by a limited increase in fuel taxes for January. Experts acknowledged that a monthly inflation surge was predictable considering the substantial minimum wage increase implemented at the beginning of the year.