The Turkish economy continues to face challenges as price increases surge, indicating that the central bank may need to maintain its tight monetary policy in order to keep inflation in check.
In November, the country’s consumer-price index, which measures the rate of price increases for a basket of goods and services, rose to 61.98%, up from 61.36% in October. This upward trend in inflation follows a brief decrease in October, but it still remains below the peak levels seen last autumn when it exceeded 80%.
While food inflation saw a slight decline to 67.2%, services such as education, health, and hospitality experienced much higher rates of inflation, surpassing 80%. On the other end of the spectrum, housing and apparel saw the lowest inflation rates at 37.5% and 40.7% respectively.
To combat the overheating economy and rising inflation, the Turkish central bank implemented a series of interest rate increases earlier this year. Last month, it raised its key rate to 40%, signaling its commitment to stabilizing prices. However, there is speculation in the market regarding whether the central bank will continue on this path. Bartosz Sawicki, a market analyst at fintech firm Conotoxia, noted that the bank may face pressure to pause its rate-hike cycle ahead of local elections in March.
The upcoming months will test the central bank’s determination and independence as it navigates these challenges, Sawicki added.