Turkey’s inflation surpasses 75% as economic leader declares ‘the worst is behind us’

Turkey’s annual consumer inflation rate exceeded 75% in May, the highest in the past 18 months, according to official data released on Monday. However, Turkey’s Finance and Economy Minister Mehmet Simsek sought to reassure the public and international investors, saying the “worst is over.” The year-on-year inflation, which surged last month to 75.45%, was mainly driven by rising prices in the education, housing, and restaurant sectors, according to data released by the Turkish Statistical Institute. Year-on-year inflation was 39.59% in May 2023 and this May marked Turkey’s highest year-on-year inflation since November 2022.

The year-on-year inflation in April stood at 69.8%, marking a significant increase from April 2023. Month-on-month inflation came in at 3.37%, slightly higher than the previous month’s figure of 3.18%. After May’s inflation figures were released Monday, Simsek insisted the “worst is over.” He predicted that the permanent decline in inflation would begin in June and that annual inflation will most likely fall below 50% by the end of the third quarter of 2024.

The peak in annual inflation was expected according to Turkey’s Central Bank projections, which forecast a 38% year-end rate. The bank raised its year-end projections from 36% to 38% earlier this month, with the year-end target for 2025 remaining at 14%. For years, Turkey under President Recep Tayyip Erdogan held an unorthodox economic policy of keeping interest rates stubbornly low despite high inflation. Erdogan returned to economic orthodoxy after the May 2023 general elections with the central bank hiking interest rates from 8.5% to 50% in an aggressive rate hike run between June 2023 and March 2024. The bank kept the rates steady at 50% in April and May but vowed to resume monetary tightening in case of a deterioration in the inflation outlook.