Turkiye’s annual inflation should drop to 53.5% in January even as prices continue jumping on a monthly basis, according to a Reuters poll yesterday that also showed inflation will end the year at 41%, much higher than official expectations.
Inflation has been stoked by a currency crisis at the end of 2021 and it touched a 24-year peak of 85.51% in October.
It fell sharply in December due to a base effect and a similar drop is expected in January.
The surge in prices in the same period last year spells relief for this year’s annual inflation calculation early this year, but economist see the drop slowing.
They forecast inflation to end 2023 at nearly twice the 22.3% rate that the central bank forecasts, potentially extending cost-of-living strains.
The median estimate of 13 economists in a Reuters poll for annual inflation in January stood at 53.5%, a sharp drop from 64.27% in December.
Forecasts ranged between 51.2% and 56.65%.
On a monthly basis the median estimate was 3.8%, in a range of 2.30-5.95%. The sharp expected monthly rise is due to a raft of administered new-year price hikes including for public transit, tobacco products, services, as well as rising food prices.
Despite soaring prices, the central bank has taken the unorthodox step of slashing its policy rate to 9% from 19% since late 2021.
It said its most recent series of cuts, late last year, was meant to address an economic slowdown.
On Thursday, central bank governor Sahap Kavcioglu said no basis remains for sharp price hikes in Turkiye.
He also stood by his previous estimate that inflation will drop to 22.3% by the end of the year.
But the median estimate of 10 economists for inflation at year-end stood at 41% in the Reuters poll, with forecasts coming in between 30% and 48%.
President Recep Tayyip Erdogan’s economic plan aims to achieve price stability by slashing borrowing costs, boosting exports and flipping chronic current account deficits to surpluses.
But the rate cuts sparked a late-2021 currency crash, which saw the lira lose 44% versus the dollar that year and another 30% in 2022, stoking inflation.
The Turkish Statistical Institute will announce January inflation data on February 3.