Türkiye’s inflation rate exceeds 75%, economists believe it has peaked

Turkey’s inflation rate rose above 75% in May from 69.8% in April, and economists expect it to peak before prices start to fall.

According to the government agency, Turkish Statistical Institute, consumer prices rose 75.45% in May from a year earlier and 3.37% on a monthly basis.

The highest annual price increases were in the education (104.8%), residential (93.2%) and hotels, cafes and restaurants (92.9%) sectors.

Economists had previously predicted that inflation in this country of 85 million people would peak at around 75 percent. The country has been steadily raising interest rates for a year to curb rising prices, putting the average Turkish consumer in deep financial difficulty as a result.

Turkey’s central bank has kept interest rates at 50% since March, citing the continued need to tackle soaring domestic inflation. At the time, the bank said it would “maintain a tight monetary stance until we see a significant and sustained decline in underlying monthly inflation trends.”

The Consumer Price Index (CPI) rose 3.4% month-on-month in May, higher than in March and April, leading some analysts to expect the trajectory of price easing may not be so simple.

“While we remain confident that inflation has peaked, today’s release contained some unpleasant surprises, leaving the pace of deflation later this year somewhat uncertain,” Liam Peach, senior emerging markets economist at London-based Capital Economics, said in a research note.

The firm had previously forecast inflation would ease to 41 percent by the end of the year, but Turkey’s central bank now predicts inflation will reach 38 percent by then.

Peach said that given the current pace of accelerating inflation, interest rates “may rise slightly towards the end of the year,” adding that “interest rates are likely to remain stagnant for the time being.”

Economists are divided on whether Turkey’s central bank will cut interest rates by the end of the year or wait until 2025.