Economy

Turkey’s annual inflation falls but target remains distant

May 6, 2025, 7:42 AM

Despite falling, Turkey's inflation remains stubbornly high with increasing cost of housing raising concerns for the future

Production costs high
Turkey’s prices accelerating
Year-end targets unlikely

Turkey’s annualised inflation has fallen for the eleventh month in a row, though the rate of decline is slowing, reducing the chances that the central bank will hit its year-end target.

The consumer price index (CPI) rose 3 percent in April while the annual rate of inflation declined to 37.9 percent, according to data issued by state statistics agency Turkstat this week. That compares with an annualised rate of 38.1 percent in March.

While about half the inflation highwater mark of 75.5 percent in May last year, but with one third of 2025 already gone, the April figure remains well above the bank’s 24 percent goal by year end.

It is not just consumer demand that is driving inflation, but a lack of supply due to high production costs, such as increasing utilities and input expenses, with electricity prices rising by 10 percent for industrial usage in April, according to Professor Dr Sadi Uzunoğlu, an economist at Trakya University.

Furthermore, though Turkey’s disinflation programme was launched almost two years ago, the central bank has only had limited success in bringing down inflation, while having used all the tools available to it, he said.

“The central bank is using all its weapons, there is nothing it has not tried,” Uzunoğlu said.

“It controls foreign currency rates, applies a certain level of interest rate so there isn’t a move into foreign currency, it is trying to prevent excessive fluctuations in the market, it has done the best it can, but inflation is still sticking at around 40 percent.”

The fall in the annual CPI between March and April of 24 basis points was the slightest decline since inflation began to retreat from its May 2024 peak.

Meanwhile, the April increase of 3 percent marked a further acceleration of prices month-on-month, building on the index rising by 2.27 percent in February and 2.46 percent in March.

Still, the April result beat market expectations.

A poll of local economists conducted by the Reuters news agency at the beginning of May forecast the CPI to increase by 3.1 percent, with year-end inflation tipped to come in at 38 percent, slightly above the actual result.

One of the factors underpinning the April inflation increase was the cost of housing, which rose by an above average 4.7 percent for the month, taking the year-on-year rise in housing expenses to 74 percent.

By contrast, food and non-alcoholic beverages input to the CPI eased to 2 percent in April, taking its annualised inflation rate to 36 percent.