Finance Minister Simsek predicts inflation to peak in May, signals relief ahead

Minister of Treasury and Finance Mehmet Simsek on Monday said that the inflation rate will hit its highest point in June, highlighting the significance of inflation data during his presentation at the Justice and Development Party (AK Party)’s Kizilcahamam camp.

“The inflation rate will hit its highest point this month. We expect a rapid decline in the coming months,” Minister Simsek said.

The Turkish Statistical Institute reports that annual inflation in Türkiye reaches 75.45% while monthly inflation hits 3.37% in May. Following this, a downward trend in inflation is anticipated.

According to sources, Simsek highlighted the importance of today’s data, predicting a peak in inflation this month with a subsequent rapid decrease.

“Our fight against inflation will continue uninterrupted,” Simsek added.

Base effect to decline 

Experts weigh the expected trends and potential impacts of recent economic developments. “A strong monthly inflation rate is expected in May. We might see the peak this month. In the following months, we will observe a relative slowdown in the price increases of fresh vegetables and fruits, particularly because of seasonal effects. Additionally, we experienced the highest monthly inflation rates in Turkish history last July and August, so the base effect will also contribute to a decrease in inflation,” said Simsek.

However, it’s too early to determine if this will bring the annual inflation rate down to the Central Bank’s year-end expectation of 38% or the 40% level suggested by the Minister of Treasury and Finance for September,” said economist Sinan Alcin.

Importance of continuing measures

Meanwhile, economist Muhammet Bayram also emphasized the onset of a disinflationary process.

“With May’s inflation, a significant monthly drop is expected, but we will face inflation nearing 70% because of the annual effect. We predict that inflation, which will reach its highest levels annually, will rapidly decrease in the year’s second half. The main driver of this will be the base effect. Because last year’s inflation was higher during the same months, this year’s lower inflation will lead to a disinflationary process,” Bayram said.

However, we may see rigidity in inflation at the 40% level annually. To break this rigidity, particularly in sectors with persistently high inflation such as education, health, and restaurant services, an interim solution will be needed to bring annual inflation down to 40%,” he added.