Annual consumer price inflation in Türkiye eased slightly more than expected in March, official data showed Monday, dropping further ahead of the key May 14 presidential and parliamentary elections.

Driven by easing price gains in energy and transportation, consumer prices rose 50.51% on an annual basis in March, the Turkish Statistical Institute (TurkStat) said, marking a slowdown for a fifth consecutive month.

Month-over-month, the inflation rose nearly 2.3%, the statistical institute said.

The consumer price index (CPI) touched a 24-year peak of 85.51% in October. It fell sharply in December and eased to 55.2% in February with a favorable base effect.

The price rise in March was led by the restaurant and hotel sector, which surged 70.7% year-over-year, closely followed by a 67.9% rise in key food and nonalcoholic drinks prices.

Core inflation, which strips out volatile items like food and energy, slowed to an annual 47.4% last month, down from 50.6% in February.

Another key data reveals that food inflation was at 67.9%, down from an annual 69.3% in February.

The slowdown in consumer inflation was largely down to energy, where price gains slowed to 35.7% from 50% during the same period. Transportation costs rose an annual 28.7%, down from 44.9%.

Evaluating the data, Treasury and Finance Minister Nureddin Nebati stressed the government was aware of the negative impacts of high inflation and therefore said they would not compromise on the fight against price increases.

"We will continue to take our steps with determination without causing a loss of production and employment, and we will gradually and permanently reduce inflation," Nebati wrote on Twitter.

The minister emphasized that 2022 was spent under high inflation pressure, which he said was caused by multiple and multidimensional global crises.

The March reading came in less than a predicted 2.85% in a Reuters poll, which had forecast that consumer prices would increase 51.3% from a year earlier.

The southeastern region was hit almost two months ago by massive earthquakes which killed over 50,000 people in Türkiye and left millions homeless.

The quakes are expected to cost Türkiye more than $100 billion (TL 1.92 trillion) and shave one to two percentage points off growth this year.

Last month, Türkiye’s central bank kept its policy rate steady after easing to 8.5% to support growth and employment after the disaster.

While the latest data still shows strong pricing pressures, the increase in all groups was lower than last year, which helped the drop in the headline, the Dutch banking giant ING said.

"The downtrend in annual inflation in March is likely to continue in the coming few months mainly due to strong base effects, though currency stability will remain key for the outlook," it said in a blog.

The government has endorsed monetary stimulus over the last several years, aiming to achieve price stability by slashing borrowing costs, boosting exports and flipping chronic current account deficits to surpluses.

Nebati stressed Türkiye has managed to see inflation maintain a downward course from 85% in October last year, driven by what the minister said were "accurate steps we took."

"But most importantly, while Türkiye recorded this decrease in inflation, it did not experience losses in investment, employment and production, on the contrary, in this process, the employment and export records of our Republic’s history were simultaneously broken," he said.

Before the earthquakes, inflation had been expected to keep falling to around 35%-40% by June. However, it is now seen to be around 45%, according to the median forecast of six economists who gave estimates to the Reuters poll.

The survey sees the consumer prices ending the year at 46.5%.

The domestic producer price index was up 0.44% month-over-month in March for an annual rise of nearly 62.5%, the statistical institute said.

It marks the lowest reading since November 2021 and implies high but relatively improving cost-push pressures compared to previous months, ING said.

"While the monthly reading was at 0.4% with support from price drops in utilities and energy, the base effects have been the main determinant of the decline in annual inflation," it added.

"Our economy has not sacrificed its dynamic structure, production increases and the growing trend to the fight against inflation," Nebati said.

"We are moving forward by taking into account the interests of our country and nation with a comprehensive understanding, without paying attention to superficial solutions that resort to easy ways," he added.