Turkey’s Inflation Forecast for January

ISTANBUL (Reuters) – Turkey’s monthly inflation rate is expected to rise sharply to 4.35% in January, driven by an annual hike in the minimum wage and various new year price adjustments. Meanwhile, the annual inflation rate is projected to slow further, according to a Reuters poll released on Wednesday.

The median estimate from 10 economists predicts an annual inflation decline to 41.25% in January, with forecasts ranging from 40.73% to 41.57%. Monthly inflation forecasts vary between 4% and 4.63%.

Annual inflation has been decreasing since last May, when it surpassed 75%, due to tighter monetary and fiscal policies that curbed overheating domestic demand. In December, it slowed to 44.38%, aligning with the central bank’s year-end projections, driven chiefly by rising education and housing prices.

According to the poll’s median estimate, annual inflation is expected to ease to 28% by year-end, still above the central bank’s forecast of 21%. The central bank initiated an easing cycle in December, cutting its policy rate to 45% last week while promising to maintain adequately tight policy to ensure ongoing disinflation.

Despite updates with most taxes and fees being influenced by the standard inflation coefficient for 2025, the government restricted this month’s fuel tax hike to 6% to aid its disinflation efforts.

Deutsche Bank (ETR:DBKGn) has anticipated that early 2025 might bring further inflation challenges, although strong base effects should support a continued decline in the annual inflation rate. They emphasized that subdued food inflation, limited tax increases on fuel prices, and the stability of the lira against a basket of USD and EUR will likely ease inflationary pressures more than initial expectations.

While factors suggest continued disinflation, the bank warned of potential inflation stickiness linked to gradual economic rebalancing and persistently high inflation expectations.

The Turkish Statistical Institute will release January inflation data at 0700 GMT on Feb. 3.