Turkey’s inflation rate fell for the first time in eight months, slowing faster than expected from its peak in May.
Data released today showed that the annual inflation rate fell to 71.6% in June, from 75.5% in the previous month, and the monthly inflation rate – the central bank’s preferred measure – rose to 1.6%.
Economists expected annual inflation to hit 72.6%, and to rise 2.2% on a monthly basis, according to a Bloomberg poll.
The beginning of the decline
Türkiye has thus begun to turn the page on two years of high living costs as a result of high inflation.
According to Bloomberg, officials are optimistic that this slowdown will be the beginning of a rapid decline in inflation after a strong monetary tightening cycle that led to raising the main interest rate by more than 40% to reach 50% in less than a year.
Investors are closely watching how inflation slows as they accumulate domestic assets, and the future path of price levels will also determine when interest rate cuts return to the agenda of monetary policymakers, who have said they will stick with higher rates until a significant and sustained decline in monthly inflation is achieved.
Treasury and Finance Minister Mehmet Simsek said earlier this week that it was “important” that inflation slowed to below 42%, the upper range of the central bank’s year-end forecast but still eight times the official target rate of 5%.
trade deficit
In another context, the Turkish Ministry of Trade stated that the country’s trade deficit rose in June by 21.4% year-on-year to $6.43 billion amid a decline in both exports and imports.
Exports fell 10.6 percent year-on-year to $18.57 billion in June, while imports fell 4.1 percent to $25 billion during the same period, the ministry said in a statement.
