Turkey: Inflation finally retreats in November
December 3, 2018
Consumer prices fell 1.44% from the previous month in November, contrasting October’s 2.67% increase, according to data released by the Turkish Statistical Institute (Turkstat). November’s price decrease was chiefly driven by lower prices for transport; recreation and culture; furnishing and household equipment; and food and non-alcoholic beverages.
Inflation fell from October’s multi-year high of 25.2% to 21.6% in November, while core inflation declined from 24.3% to 20.7%. According to Muhammet Mercan, Chief Turkey Economist at ING: “The favourable monthly reading is largely down to tax cuts in consumer durables, furniture and automobile introduced by the government in early November, a likely impact of temporary price discounts in targeted items in the consumer basket, with the government’s decision of price freezes and voluntary private sector involvement, as well as sharp decline in oil prices.”
Looking ahead, inflation could pick up temporarily in Q1 2019 due to a less supportive base effect and as temporary price discounts subside. However, inflation should then decline on weak domestic demand. The evolution of the volatile lira and the future direction of monetary policy will be key factors to watch. In particular, the recent currency strengthening and more benign November inflation figure could possibly encourage the Central Bank to ease its stance in the near term, which could negatively affect inflation expectations.
Author: Oliver Reynolds, Economist