Due to the cumulative impact of the depreciation of the Turkish Lira following the elections and tax increases, it is expected that the Consumer Price Index (CPI) will rise in September. According to the Reuters survey, the monthly CPI predictions of 10 economists vary between 3.7% and 6.2%, while the annual predictions range from 60% to 63.7%.
The Effect of Tax and Cost Increases on Inflation
Following the elections, tax increases on items such as cigarettes and fuel, along with rising costs due to earthquake-related expenses, have led to increases in items like corporate taxes and VAT. These factors have accelerated the rise in inflation.
Central Bank Revises its Forecasts
The Central Bank (CBT) has revised its inflation forecasts, increasing the year-end inflation rate from 22.3% to 58%. However, the CBT predicts that inflation will decrease to 33% by 2024.
In line with this, the CBT has made fighting inflation its primary focus, implementing a tight monetary policy and raising the policy interest rate from 8.5% to 30% over the past four months. In a meeting held last week, the CBT continued its determined pursuit of disinflation by raising the policy interest rate by an additional 500 basis points.
Changing Year-End Inflation Forecasts
According to Reuters’ survey, the median year-end inflation forecast stands at 68.5%, but predictions range from 66.45% to 72%. These forecasts represent a significant shift from the August survey, where the median was at 55.7%.
The Turkish Statistical Institute (TÜİK) will announce the September Consumer Price Index (CPI) data on October 3rd at 10:00 AM. As Turkey’s economy continues to grapple with inflation, markets and economists will closely monitor these figures, emphasizing the importance of the fight against inflation.