Türkiye's inflation drops more than expected to 44.38 percent in December

Turkey's annual inflation rate fell to 44.38% in December 2024, down from 47.09% in November, marking the seventh consecutive month of decline since June 2024. According to official data from the Turkish Statistical Institute, the consumer price index rose at its slowest pace since May 2023 in December, at 1.03%, cooling from 2.24% in November. The December figure was also below market expectations of 45.21%.

Turkey's Minister of Treasury and Finance, Mehmet Şimşek, stated on social media platform X: "Our top priority is to address the financial difficulties of our citizens. In this regard, we have established the necessary policy framework and will continue to resolutely implement the disinflation program."

Among various goods and services, Turkey's transportation prices had the lowest annual inflation rate at 25.88%, while the education sector had the highest at 91.64%. Food and non-alcoholic beverage prices decreased year-on-year to 43.58%, compared to 48.57% in November. Clothing and footwear saw the largest month-on-month decrease in December, falling by 0.67%, while furniture and household equipment saw the largest month-on-month increase, rising by 2.78%. Şimşek added, "The 1% inflation rate in December is the lowest in the past 19 months. The annual inflation rate fell to 44.4%, which is 2.4 percentage points higher than the Central Bank's forecast range announced in November 2023. Consequently, inflation in 2024 decreased by 20 percentage points compared to the end of 2022 and 2023."

The Finance Minister also affirmed that Turkey's inflation rate will continue to decline. He further projected that inflation would align with the 2025 targets, with increased fiscal policy support, reduced stickiness in service sector inflation, and improved expectations. The Central Bank of Turkey anticipates inflation to fall to 21% by the end of 2025.

The Central Bank of Turkey began easing monetary policy last week, cutting interest rates by 250 basis points to 47.5%. With inflation continuing to decline, the central bank may cut rates again by 250 basis points at its meeting this month. Interest rates had been held at 50% since the last cut in early 2023. The drop in annual inflation to 47.09% in November suggests that inflation is sustainably trending towards the 5% target in the coming years. The recent 30% increase in the minimum wage, a smaller rise compared to previous hikes in Turkey, could further reduce core inflation. The decline in inflation and interest rates comes after two years of economic turmoil, with annual inflation reaching 85% in 2022 and 75% earlier this year. The Turkish lira has depreciated by 90% in seven years, falling from 3.8 lira to 35.3 lira against the dollar, severely impacting incomes and savings. Following the release of the latest inflation figures, the Turkish lira stood at 35.36 against the dollar.