Turkey's annual inflation rate remained relatively stable near 60 per cent last month, according to official data released on Thursday, offering the first evidence that President Recep Tayyip Erdogan's economic policy U-turn was making an impact.
The TUIK state statistics agency said consumer prices rose 61.5 per cent over the 12-month period ending in September."
In August, the annual rate stood at 58.9 per cent, and it was even lower at 47.8 per cent in July.
The month-on-month increase in prices also slowed, dropping to 4.8 percent in September from 9.1 percent in August and 9.5 percent in July.
The data suggests that Turkey's inflation rate might be starting to peak after Erdogan approved a series of sharp interest rate hikes, raising the policy rate from 8.5 percent to 30 per cent in just four months.
"The small (by Turkey's recent standards) rise in inflation to 61.5 per cent
"The small (by Turkey's recent standards) rise in inflation to 61.5 percent last month, from 58.9 percent in August, provides the first signs that the inflation spike is close to leveling off," Capital Economics analyst William Jackson said.
Erdogan had initially pursued a different economic strategy but reversed his approach after surviving a challenging May election, which coincided with the worst economic crisis during his two-decade rule. Subsequently, he handed over Turkey's economic reins to a group of technocrats with experience on Wall Street and broad support among foreign investors.
Finance Minister Mehmet Simsek is credited with convincing Erdogan that Turkey would enter a systemic crisis unless he radically changed course.
Inflation is deepening mass poverty, and firms are urged to embrace creativity," noted experts.
The annual inflation rate had reached a staggering 85 per cent in October of the previous year, marking the highest level since Turkey's transition to a full-fledged market economy in the 1990s.
However, the rate began to slow, primarily reflecting statistical anomalies attributed to the "base effect" – high levels of inflation started appearing smaller compared to even higher figures recorded 12 months earlier. The annual rate dropped to an 18-month low of 38.2 per cent in June.
Simsek's economic overhaul included a series of steps that contributed to a short-term spike in prices.
Policymakers allowed the Turkish lira to lose 27 per cent of its value against the dollar since the election, a move aimed at helping the central bank refill its depleted coffers.
Simsek also raised taxes to fulfill Erdogan's election campaign pledges and streamlined a series of onerous regulations to make economic management more transparent.
"Inflation in Turkey is being fueled by a vicious mix of deeply negative real interest rates, hefty wage hikes, an overhaul of the tax system, and persistent lira weakness," said Bartosz Sawicki, an analyst at the Conotoxia investment group.
"The monthly jump in prices is further exacerbated by soaring food prices and skyrocketing oil prices," Sawicki added.
Despite the economic challenges, the Standard and Poor's rating agency was impressed enough by Simsek's approach to raise its long-term outlook for Turkey from negative to stable.
They stated, "We believe that by 2026, absent renewed political uncertainty, the new team can rebalance Turkey's economy towards more balanced external and fiscal accounts, as well as more acceptable levels of inflation."
