Turkey’s monthly inflation rate is expected to increase to 3.1% in April, driven by rising energy costs and the weakening of the lira following the imprisonment of President Tayyip Erdogan’s main political rival, according to a Reuters poll released Tuesday.
Eleven economists surveyed by Reuters predicted that monthly inflation would climb from 2.46% in March to 3.1% in April, with estimates ranging between 2.8% and 3.6%. On a year-on-year basis, inflation is forecast to ease slightly to 38%, with expectations between 37.6% and 38.7%.
The increase in inflation is partly linked to significant energy price hikes implemented in April. Electricity prices for households rose by 25%, while industrial users saw a 10% increase. Natural gas prices also went up by 20% for industrial users and 24.2% for electricity producers. Given energy’s large share in the inflation basket, economists estimate that these hikes will add about 0.5 percentage points directly to inflation.
In addition, prices of unprocessed foods such as fruits and red meat, along with automotive prices—which are sensitive to currency fluctuations—are also expected to push inflation higher in April.
The Turkish lira suffered heavy losses in March, dropping as much as 12% against the U.S. dollar to a record low of 42, following the arrest of Istanbul Mayor Ekrem Imamoglu. Imamoglu, Erdogan’s chief political opponent, was jailed on graft charges pending trial. However, the lira later recovered some ground due to market stabilizing measures from Turkey’s central bank. It has since traded near 38 per dollar, still about 4.6% weaker than before the mayor’s arrest.
The central bank responded to the market turmoil with aggressive policy tightening. It raised its lending rate by 350 basis points to 49% and sold approximately $50 billion in foreign reserves. Overall, the bank has increased its policy rate by 700 basis points since the arrest to stabilize the currency and curb volatility.
Before this intervention, the central bank had been easing monetary policy, gradually reducing the rate from over 75% in May 2024 to 42.5%, following a slowdown in inflation.
In March, monthly inflation rose by 2.46%, below expectations, and annual inflation slowed slightly to 38.1%.
Looking ahead, the median forecast from economists expects inflation to fall to 30.5% by the end of 2025, a slight revision from the previous forecast of 30%.
Minutes from the central bank’s latest monetary policy meeting noted signs of rising inflation trends in April. They highlighted price increases in durable goods that are highly sensitive to exchange rate changes.
Finance Minister Mehmet Simsek acknowledged that inflation expectations had worsened but said the government did not foresee lasting damage. He affirmed that inflation is expected to stay on track with the central bank’s target.
The central bank’s year-end inflation forecast sets the midpoint at 24%, with an upper limit of 29%.
Turkey’s Statistical Institute is scheduled to release official inflation data for April at 0700 GMT on May 5.
Related topics:
