By Joshua Kirby
Turkish consumer prices continued to rise in December, although a slightly slower increase in core prices may take some pressure off the country's central bank in its battle against soaring inflation rates.
According to data from Turkstat, the consumer price index rose by 64.77% YoY in December 2023. While this was slightly below the economists' expectation of 65.0% from a FactSet poll, it still represents an increase from the 61.98% rise in November.
Turkey's central bank has been grappling with high inflation that has weighed on the Turkish lira. In response, the bank has raised its key interest rate throughout the year and currently stands at 42.5%. However, there are indications that the bank may consider ending its tightening cycle if inflationary pressures ease in the coming months.
In terms of sectors, services were the main driver of Turkish inflation in December. The hospitality sector registered the highest rate at over 93% YoY, followed by health, education, and transportation. On the other hand, housing saw the lowest rate at just over 40%, while items like clothing and furniture were similarly at the lower end.
Core inflation, which excludes more volatile price movements in energy, food, tobacco, and gold, showed a smaller increase compared to the headline rate. It edged up to 70.64% from 69.89% in November, indicating a slowdown in price rises at a fundamental level. This suggests that the Turkish central bank might be able to pause its tightening cycle this month, according to Liam Peach, a senior emerging markets economist at consultants Capital Economics. Peach also added that inflation could considerably ease throughout the year.
Overall, these inflation figures are likely to provide some comfort to the central bank in its efforts to combat rising prices.
