Turkey inflation drop hints at further rate cut to 45.0%- economist
2025.01.03 04:59
Investing.com — Turkey experienced a larger-than-expected decrease in inflation last month, falling to 44.4% from 47.1% in November.
The inflation decline was more than both our own and the LSEG consensus forecast, which predicted 46.0% and 45.2%, respectively. In terms of monthly changes, consumer prices rose by 1.0%, marking the smallest increase since May 2023 and, prior to that, May 2021.
The decrease in inflation was seen across various sectors. Food inflation, which had shown strong growth in the two months prior, eased in December. Most notably for the central bank, core inflation, which excludes volatile items like food and energy, continued to decrease. In monthly terms, core inflation was at 1.1%, reaching a multi-year low.
The Central Bank of the Republic of Turkey (CBRT) began its easing cycle last week with a 250 basis point rate cut, bringing the rate down to 47.5%.
The recent modest increase in minimum wage, which is small compared to previous hikes in Turkey, is expected to further reduce core inflation. Moreover, the inflation print “points towards another 250bp interest rate cut, to 45.0%, at the next central bank meeting on 23rd January,” according to Capital Economics economists.
“The weaker-than-expected outturn in today’s data release will probably give policymakers confidence to proceed with another 250bp cut (to 45.0%) at its meeting later this month,” the economists said.
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