Turkey Surprises with Faster Inflation Drop Than Analysts Expected
Turkey’s annual inflation eased to 30.9% in March, beating forecasts despite Middle East tensions, as the central bank halts rate cuts amid rising energy costs from regional instability.
According to data released on Friday by the national statistical agency TurkStat, the annual price increase stood at 30.9%. The February rate was 31.5%, while the average forecast from a Bloomberg survey of 20 analysts was 31.4%.
Monthly inflation fell to 1.94% from 2.96% the previous month, significantly diverging from the median forecast of 2.34% resulting from another survey of 16 analysts.
The economic consequences of the war in the Middle East, with rising energy prices, threaten the disinflationary trend that had begun to emerge at the end of last year. Turkey, due to its proximity to Iran and its role as a major importer of oil and natural gas, is particularly vulnerable to such disruptions.
In response to this situation, the Central Bank of Turkey decided to halt its cycle of interest rate cuts last month, effectively implementing a hidden rate increase.
The governor of the central bank, Fatih Karahan, stated earlier this week in local media that the monetary authority would continue to maintain a tight policy in order to strengthen the disinflationary trend. Despite government efforts to mitigate the war’s impact, rising energy prices are expected to have inflationary consequences.
Before the data were published, economists at ING Groep NV noted that interest rate cuts do not seem likely “at least for the coming months.”
