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, while the annual rate is seen slowing further, a Reuters poll showed on Wednesday.
The median estimate of 10 economists sees annual inflation declining to 41.25% in January, with forecasts ranging from 40.73% to 41.57%. The forecasts for monthly inflation range between 4% and 4.63%.
Annual inflation has been falling since last May, when it exceeded 75%, as tighter monetary and fiscal policies curbed overheating domestic demand. In December, it slowed to 44.38%, in line with the central bank’s year-end projections, with education and housing prices contributing the most to the rise.
According to the poll’s median estimate, annual inflation is expected to slow to 28% by year-end, remaining above the central bank’s forecast of 21%.
The central bank launched an easing cycle in December and cut its policy rate to 45% last week, while pledging to maintain sufficiently tight policy to ensure continued disinflation.
While most taxes and fees have been updated in line with the standard inflation coefficient for 2025, the government limited a hike in fuel tax this month to 6% as part of its disinflation efforts.
Deutsche Bank said early 2025 would bring inflationary challenges, but strong base effects should support a continued decline in annual inflation.
“The anticipated subdued food inflation in January, limited tax hikes on fuel prices, and lira stability against a basket of USD and EUR are likely to keep inflationary pressures lower than our earlier estimates at the beginning of the year,” Deutsche Bank said.
While several factors suggest continued disinflation, the bank also warned of potential inflation stickiness amid the gradual economic rebalancing and persistently high inflation expectations.
The Turkish Statistical Institute will release January inflation data at 0700 GMT on Feb. 3.
(Reporting by Ezgi ErkoyunEditing by Ece Toksabay and Gareth Jones)
