Monthly inflation hits five-month high

Consumer inflation in Turkey reached its highest level since August on a monthly basis, ending a five-month downward trend in monthly inflation. According to data from the Turkish Statistical Institute (TurkStat), consumer prices increased by 6.70 percent in January compared to December, also due to increases in the minimum wage and tax adjustments. The expectation in the Bloomberg HT survey was 6.50 percent. Inflation accelerated in Turkey in January. According to data announced by the Turkish Statistical Institute (TurkStat), the consumer price index increased by 6.7 percent in January compared to the previous month. Annual inflation in January was determined as 64.86 percent. Economists participating in the Bloomberg HT survey expected a monthly increase of 6.5 percent. The annual inflation expectation was recorded as 6.57 percent. Core inflation also followed a horizontal course in January. According to data from the TurkStat, annual core inflation in January was recorded as 70.48 percent. The fastest monthly increase was in the health group. According to TÜİK data, the highest monthly increase according to main expenditure groups was in the health group with 17.68 percent. The health group was followed by restaurants and hotels with 12.17 percent; and various goods and services with 10.25 percent. In January, a 1.61 percent decrease was observed in clothing and footwear prices. The main group with the least increase compared to the same month of the previous year was clothing and footwear with 40.62 percent. In contrast, the main group with the highest increase compared to the same month of the previous year was restaurants and hotels with 92.27 percent. Of the 143 main headings covered in the index, as of January 2024, there was a decrease in the index of 8 main headings, while there was no change in the index of 4 main headings. There was an increase in the index of 131 main headings. Producer inflation also accelerated It was observed that producer inflation also accelerated in January. Producer prices increased by 4.14 percent in January compared to the previous month. Thus, a five-month peak was seen in producer prices on a monthly basis. Producer prices increased by 44.20 percent on an annual basis. The message of ‘tightness will continue’ Following last year’s general elections, the Central Bank of the Republic of Turkey (TCMB) had raised the policy rate by 36.5 points as a result of the tightening since June. In its last meeting, the TCMB stated that the level of monetary tightness necessary to establish disinflation had been reached by lowering the one-week repo rate to 45 percent, and gave the message that the tightening cycle was complete. The new governor of the TCMB, Fatih Karahan, had also given the message that the current tightness would continue. In his first statement after taking office, Karahan had said, “We are determined to maintain the necessary monetary tightness until inflation declines to levels compatible with our target. We are closely monitoring inflation expectations and pricing behavior. We will definitely not allow any deterioration in the inflation outlook.” The TCMB inflation forecasts indicate that annual inflation will complete 2024 at 36 percent after rising to the 70-75 percent band towards the middle of the year. Leading indicators had also signaled an acceleration The Türk-İş research and İstanbul Chamber of Commerce (İTO) indexes, which are considered leading indicators in terms of inflation, had also signaled an acceleration in inflation in January. The Confederation of Turkish Trade Unions (Türk-İş) had announced that food inflation calculated in Ankara had increased by 4.27 percent in January compared to the previous month, and that the hunger threshold had been realized as 15,048 TL.