Economy

Turkish inflation sticks on food and rental costs

November 4, 2024, 4:17 PM

A greengrocer at a food market in Uskudar, Istanbul. Turkey's October inflation figure was higher than expected

Food and housing up in October
Consumer prices up 2.8%
Slight dip belies forecasts

Turkey’s inflation remains stubbornly resistant to efforts to bring it under control, easing only marginally in October as food and rental pricing pressures continued to build.

Annualised inflation dipped to 48.5 percent in October, down slightly from 49.3 percent the preceding month.

Month on month, consumer prices were up 2.8 percent, just under September’s 2.9 percent, according to data issued on November 4 by Turkstat, the government statistics agency.

The October figure, like that for September, was higher than expected. A poll of economists conducted by Reuters forecast a monthly rise in the consumer price index (CPI) of 2.6 percent, and annualised inflation to dip to 48.2 percent.

Food costs were among the biggest movers on the Turkstat index, rising 4.3 percent in October, with housing costs up 2.9 percent for the month and 89.3 percent for the year.

The slowing deceleration in the CPI has already prompted the central bank to warn it will have to delay any cuts to its key lending rate, which has been held at 50 percent since March.

There had been speculation that the bank could reduce interest fees, especially as inflation fell below the lending rate in September. But with inflation remaining high observers do not see any cuts coming until late in the first quarter of next year.

One economist, Mustafa Sönmez, forecast that year-end inflation would stay at around the October level. Sönmez said he did not believe that the central bank and government would hit even the upper target in the projection band of 41.5 percent.

“Monthly inflation is increasingly sticky at around 3 percent for now, and in order to meet their target, inflation would have to be 1 percent for the next two months,” he told AGBI.

A problem in the state’s disinflation efforts is that increases for food prices and rental costs are structural or supply side issues, which cannot simply be solved by monetary measures, Sönmez said, with more in the way of policy reforms needed to resolve them.

Inflationary pressures were also cited by the Istanbul Chamber of Industry in its latest Purchasing Managers Index (PMI), released on November 1, as continuing to put pressure on manufacturers. However, the chamber said, there had been a softening of wholesale prices in the past few months.

The chamber’s headline PMI edged up to 45.8 points for October, better than the 44.3 points recorded for the previous month but well short of above 50 points , which would indicate expansion in the industrial sector.

Turkey’s central bank has announced it will release a revised inflationary forecast for the end of 2024, as well as for the coming two years, on November 8.