Turkish inflation eased for the sixth consecutive month in November. However, it was still higher than analysts expected, leading to concerns that Turkey’s Central Bank might delay cutting interest rates.
Turkey’s annual inflation rate slowed in November for the sixth month in a row, to 47.1%. That was a fall from October’s 48.6% but still higher than analyst forecasts of 46.6%.
November’s figure was mainly led by a fall in the rate of inflation of household costs including housing, electricity, water, gas and other fuels, which dropped to 74.5%, down from 89.4% in October.
The inflation rate for spending at cafes, hotels and restaurants, also eased, down from October’s 62.1% to 59.4%.
Tobacco and alcoholic drinks inflation was down from 52.2% in October to 39.3% in November but food and non-alcoholic drinks inflation rose to a four-month high of 48.6% in November, against October’s figure of 45.3%.
Turkey’s annual core inflation dropped to the lowest level since May 2023 in November, at 47.1%, down from October’s 47.8%.
Turkey’s month-on-month inflation in November came in at 2.2%, easing from October’s 2.9% increase, although still above market expectations of 1.9%. That was also the smallest growth in five months.
Could Turkey’s November inflation result delay rate cuts?
Kyle Chapman, FX markets analyst at Ballinger Group, said in a note: “There was less progress on inflation than the market had hoped this month, but with the downward trend intact there is still scope for the CBRT [Central Bank of the Republic of Türkiye] to begin cutting rates later this month, albeit likely by a smaller step. The direction is clear and some slightly weaker momentum on a single data point likely isn’t enough to spook policymakers into holding steady.”
Turkey has been dealing with high inflation over the past few months, following the central bank’s rapid cuts in interest rates, supported by President Recep Tayyip Erdogan. The latter was firmly of the opinion that higher interest rates led to more inflation, thus justifying the aggressive rate cuts.
However, following inflation soaring out of control and a sharp drop in the lira, leading to the economy overheating, the central bank chose to hike interest rates instead, with inflation now slowly decreasing.
