Turkish Inflation Hits 32.4% in April, Exceeding Forecasts
Turkey faces unexpectedly high inflation of 32.4% in April, driven by energy and food costs amid the Iran war, pressuring central bank policies and investor confidence.
Turkey Faces Inflation Rise Exceeding Expectations Amid Impact of War in Iran.
The economic situation in Turkey continues to deteriorate as prices increase more than expected in April, influenced by the consequences of the war in Iran.
Recent data released by the national statistics agency TurkStat show that annual inflation rose to 32.4% in April, up from 30.9% in March. This increase exceeded analysts’ forecasts, who had predicted a rate of 31.3% according to a Bloomberg survey.
The monthly inflation increase accelerated to 4.2%, compared to 1.94% the previous month, marking the highest monthly rise for April since 2022.
Hande Sekertzi, chief economist at İş Portföy, noted that food and clothing prices surpassed expectations. She warned that inflation could exceed 30% by the end of the year. “We had already identified high prices in the housing and transportation sectors due to increases in energy and fuel prices,” she said, pointing out that further interest rate cuts might be delayed beyond July.
Bank stocks dropped by as much as 1.6% following the data release, indicating that investors expect higher interest rates for a longer period.
Turkish authorities had previously warned investors about price pressures in April and May. As a result of these pressures, the Central Bank of the Republic of Turkey decided not to proceed with new interest rate cuts last month for the second time. This decision was made in light of “geopolitical uncertainties” and volatile energy prices due to the war in the Middle East.
Turkey, like other developing countries dependent on energy imports, is severely affected by the war in Iran, which began on February 28. The price of Brent crude oil reached $109 per barrel on Monday morning, with energy sectors such as transportation and utilities contributing significantly to the price hikes in April.
Although the central bank kept its main policy rate at 37%, it effectively followed a tightening policy by using its higher 40% rate to fund banks since the beginning of the war.
Before the April data announcement, Selva Bahar Baziki of Bloomberg Economics raised her year-end inflation estimate to 28.5%, about five percentage points higher than her previous pre-war estimate. The central bank’s target remains at 16%.
Karahan may revise official targets and inflation forecasts when presenting the updated outlook on May 14.
