In January, inflation in Turkey registered its biggest monthly jump since August with a 6.7% increase compared to December, while year-on-year inflation reached almost 65%, according to the Turkish Central Bank.
The consumer price index (CPI) for the country of 85 million people increased 64.86% year-on-year, up slightly from 64.77% in December. The sectors with the largest monthly price increases were healthcare at 17.7%, hotels, cafes and restaurants at 12% and miscellaneous goods and services at just over 10%. The only sector with a monthly price decrease was clothing and footwear at -1.61%.
Food, beverages and tobacco, as well as transportation, increased between roughly 5% and 7% on a monthly basis, while housing rose 7.4% from December, CNBC reported.
Economists say the monthly increases stem from a significant minimum wage increase that Turkey's government has set for 2024. The minimum wage for the year has increased to 17,002 Turkish liras ($556.50) per month, a 100 percent increase from January 2023.
The Turkish central bank has been on a sustained mission to reduce inflation, implementing eight consecutive rate hikes since May 2023, for a cumulative 3,650 basis points. The bank's latest hike, on January 25, raised the key interest rate by 250 basis points to 45%.
The more conventional approach follows several years of unorthodox policy, during which Ankara refused to tighten rates despite rising inflation. The lira has depreciated 38% against the dollar so far and has lost more than 80% of its value against the world currency over the past five years.
The latest inflation print comes just days after Turkey's central bank governor Hafizze Gaye Ercan announced her resignation, saying the decision was due to a "reputation killing" campaign and the need to protect her family.
Erkan became the bank's governor by presidential decree in June 2023 and led - along with Turkish Finance Minister Mehmet Simek - Turkey's monetary policy turnaround and subsequent series of interest rate hikes.
She was replaced by the central bank's deputy governor, Fatih Karahan, who spent nearly a decade as an economist at the Federal Reserve in New York.
The January inflation data "underscore the continued strength of services inflation and may put pressure on new central bank Governor Karahan to restart the central bank's tightening cycle," Liam Pietsch, senior emerging markets economist at London-based Capital Economics, wrote in a research note.
"The fact that inflation did not rise significantly more than expected in January is a positive given the uncertainty about the impact of the minimum wage increase," Peach added. "But the numbers represent a small setback for the disinflation process and highlight the ongoing strength of services inflation. For now, the central bank's year-end inflation forecast of 36% remains unchanged," he said. / BGNES
