Turkey’s Consumer Inflation Reaches 75% in May, Prompting Debate on Central Bank’s Monetary Policies

In May, Turkey’s annual consumer inflation rate exceeded 75%, the highest in the past 18 months, according to official data released on Monday. The year-on-year inflation, which surged last month to 75.45%, was mainly driven by rising prices in the education, housing, and restaurant sectors, according to data released by the Turkish Statistical Institute.

Despite this, Turkey’s Finance and Economy Minister Mehmet Simsek sought to reassure the public and international investors, saying the “worst is over.” He predicted that the permanent decline in inflation would begin in June and that annual inflation will most likely fall below 50% by the end of the third quarter of 2024. However, it was expected that Turkey under President Recep Tayyip Erdogan held an unorthodox economic policy of keeping interest rates stubbornly low despite high inflation for years. Erdogan returned to economic orthodoxy after the May 2023 general elections with the central bank hiking interest rates from 8.5% to 50% in an aggressive rate hike run between June 2023 and March 2024. The bank kept the rates steady at 50% in April and May but vowed to resume monetary tightening in case of a deterioration in the inflation outlook.

In April, year-on-year inflation stood at 69.8%, marking a significant increase from April 2023. Month-on-month inflation came in at