Turkey’s annual inflation rose at a slower-than-expected pace in July but still reached a fresh 24-year high of nearly 80%, official data showed Wednesday, as global energy and commodity costs continue to weigh on prices.
Driven by soaring food, housing and energy costs, consumer prices surged 79.6% last month from a year earlier, the Turkish Statistical Institute (TurkStat) said. The new inflation figure is up about one percentage point from June data and marks the highest level since 1998.
The increase turned out to be smaller than in previous months, signaling that price pressure might be slowing. Surveys had expected the consumer prices index (CPI) to top 80% in July.
Prices surged since last autumn as the Turkish lira weakened after the central bank in September embarked on a 500 basis-point easing cycle. Russia’s invasion of Ukraine, which led to a surge in gas, oil and grain prices, has compounded the situation in the import-reliant country.
On a month-over-month basis, consumer prices rose 2.37% in July, the statistical institute said, below forecasts of around 2.9%.
Jason Tuvey, a senior emerging markets economist at Capital Economics, said annual inflation may be approaching a peak with energy inflation falling sharply and food inflation appearing close to topping out.
"Even if inflation is close to a peak, it will remain close to its current very high rates for several more months," Tuvey said in a note.
"Sharp and disorderly falls in the lira remain a key risk," he said. The currency weakened 44% against the dollar last year, and is down another 27% this year. The lira was trading flat after the data at 17.9560 against the dollar.
The biggest annual rise in consumer prices was in the transportation sector, up 119.11%, while food and non-alcoholic drinks prices climbed 94.65%.
Annual inflation is now at the highest level since September 1998, when it reached 80.4% and Turkey was battling to end a decade of chronically high inflation.
Elsewhere, annual inflation hit a record 8.9% in the 19 countries that use the euro in July and a four-decade-high of 9.1% in the United States in June.
The domestic producer price index in Turkey climbed 5.17% month-over-month in July for an annual rise of 144.61%, the data showed.
The government has said inflation will fall with the new economic program, which prioritizes low rates to boost production and exports and aims to achieve a current account surplus.
President Recep Tayyip Erdoğan has urged "patience" as he said he expected runaway prices to soon begin to fall and come down to "appropriate" levels by February-March next year.
"A price stabilization trend has already started," Erdoğan said on Monday
"We hope that inflation will enter a significant downward trend in the first months of the new year."
The Central Bank of the Republic of Turkey (CBRT) last week revised upwards its end-2022 forecast to 60.4% from 42.8% previously. The bank’s inflation report showed the estimated range of inflation reaching nearly 90% this autumn before easing.
The monetary authority sees inflation slowing to 19.2% toward the end of next year before reaching 8.8% in 2024.
The central bank has held its benchmark interest rate steady at 14% in seven meetings this year and said disinflation will start due to other measures, the so-called base effect and an expected end to the Ukraine conflict.