Türkiye’s inflation falls below 50% for first time in 3 years

Türkiye’s annual inflation rate dropped below 50% in September for the first time in three years, signaling a potential shift in the country’s economic outlook.

According to the Turkish Statistical Institute (TurkStat), annual inflation fell to 49.38%, down from 51.97% in August. On a monthly basis, consumer prices increased by 2.97%.

Annual inflation declines below key threshold

The September data marks the first time since 2021 that inflation has fallen below 50%, a significant milestone as Türkiye grapples with high inflation.

This is the first time yearly inflation is lower than the policy interest rate set by the Central Bank of the Republic of Türkiye (CBRT) in three years.

Despite the decline, inflation remains high, though it has shown a steady decrease since the summer of 2023, when it last spiked because of tax and fuel price increases.

The monthly inflation rate in July had reached 3.23%, primarily because of hikes in tobacco, fuel and other administered prices.

Inflation forecasts and economic outlook

According to the Turkish government’s Medium-Term Economic Program, inflation is expected to decline to 41.5% in 2024 and further drop to 17.5% by the end of 2025.

The central bank maintained the policy interest rate at 50% in September, omitting its previous language on “tightening” measures for future guidance.

Bloomberg’s survey had forecasted a 48.3% annual inflation rate and a 2.2% increase for September, figures that were slightly below the official data.

Positive real interest rates achieved

The September inflation figures also indicate a positive real interest rate, as inflation has now dropped below the nominal interest rate.

This development is seen as an important step for Türkiye’s economic policy, which has faced criticism for negative real interest rates over the past several years.