Inflation in Turkey falls for 8th consecutive month as food prices fall!
Inflation in Turkey fell for the eighth straight month in January, taking it to its lowest level since June 2023 and showing that the country is gaining a slightly better grip on the problem. The year-on-year inflation rate for January came in at 42.1%, according to the Turkish Statistical Institute, down from 44.4% in December, though still above market estimates of 41.3%.
Prices slowed across most sub-indices, with non-alcoholic beverages and food inflation falling to 41.8% in January from 43.6% in December. Similarly, inflation for water, housing, electricity, gas and other fuels also eased in January.
Recreation and culture inflation had one of the largest decreases, at 33.1% in January, compared to 37.6% in December. Footwear and clothing prices also experienced significant declines, falling to 27.5% in January, from 32.3% in December.
Prices of transportation, furniture, routine maintenance and household appliances also slowed in January. Year-on-year core inflation, which excludes food and energy prices due to their inherent volatility, fell to 42.7% in January, the lowest figure in two years.
However, month-on-month inflation rose to 5% in January, the highest increase since January 2024 and in contrast to 1% in December and analysts' expectations of 4.4%. This was mainly due to Turkey's increase in the minimum wage level.
Although January’s inflation squeeze shows that Turkey is recovering somewhat from its recent economic challenges, obstacles remain. The country began trying to tackle rising inflation by cutting interest rates, a strategy put forward by President Recep Tayyip Erdoğan, who believed that lowering interest rates helped better control inflation, a strategy largely at odds with other major central banks.
The central bank then chose to raise interest rates and inflation now appears to be easing. However, Turkey's inflation rates remain high compared to other countries.
Turkey's consumer confidence index also fell in January, reaching 81, slightly down from 81.3 in December, which was a year-and-a-half high. This was mainly due to softening consumer expectations for their financial situation in the coming year, as well as falling expectations for spending on durable goods.
Turkish consumers reported feeling slightly more optimistic about the overall economic outlook for the coming year, as well as about their financial situation.
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