Türkiye's Simsek Says Disinflation to Continue, FX Pass-through Limited

A fisherman feeds cats his recently caught small fish from the Marmara Sea, along the Kadikoy sea promenade in Istanbul, Türkiye, Tuesday, April 15, 2025. (AP)
A fisherman feeds cats his recently caught small fish from the Marmara Sea, along the Kadikoy sea promenade in Istanbul, Türkiye, Tuesday, April 15, 2025. (AP)
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Türkiye's Simsek Says Disinflation to Continue, FX Pass-through Limited

A fisherman feeds cats his recently caught small fish from the Marmara Sea, along the Kadikoy sea promenade in Istanbul, Türkiye, Tuesday, April 15, 2025. (AP)
A fisherman feeds cats his recently caught small fish from the Marmara Sea, along the Kadikoy sea promenade in Istanbul, Türkiye, Tuesday, April 15, 2025. (AP)

Turkish Finance Minister Mehmet Simsek said on Friday that disinflation would continue despite some recent deterioration in expectations, adding that the government still sees inflation ending the year within its target range.

His remarks come a day after the central bank delivered a surprise 350 basis-point rate hike to 46%, reversing a short-lived easing cycle and signaling renewed commitment to tackling inflation.

The move followed weeks of market turmoil triggered by the March arrest of Istanbul Mayor Ekrem Imamoglu, President Recep Tayyip Erdogan's main political rival.

"The recent deterioration in expectations may have had some effect, but we believe we will stay within the target by year-end," Simsek said.

The central bank's unexpected hike marked a shift from the easing that began in December, aiming to anchor inflation expectations and stabilize markets.

Economists expect the lira's recent weakening to feed into April and May inflation, though annual inflation slowed to 38.1% in March. The bank's year-end forecast remains at 24%.

Simsek also said the impact of exchange rate pass-through on inflation would remain limited due to weak domestic demand, and noted that recent financial market volatility could cause a temporary slowdown in economic activity.

"We are approaching a threshold where we can achieve moderate growth without generating a current account deficit," he added.

The lira had plunged to a record low and Turkish assets took a hit before the central bank intervened with reserve sales and tighter funding conditions.

The bank said the recent market turbulence was expected to slightly lift April inflation readings and reiterated that further tightening would be considered if inflation risks persist.



Saudi Inflation Holds Steady in May as Rents Remain Key Driver

Aerial photo of the Saudi capital Riyadh (SPA) 
Aerial photo of the Saudi capital Riyadh (SPA) 
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Saudi Inflation Holds Steady in May as Rents Remain Key Driver

Aerial photo of the Saudi capital Riyadh (SPA) 
Aerial photo of the Saudi capital Riyadh (SPA) 

Saudi Arabia’s annual inflation rate remained stable at 2.2 percent in May 2025, maintaining a pace close to the 2.3 percent recorded in April. The continued stability in prices signals a relative balance in inflationary pressures, despite ongoing increases in housing costs.

This resilience comes amid global economic volatility, reflecting the effectiveness of Saudi Arabia’s fiscal and monetary policies, particularly in controlling energy and rental prices. The monthly Consumer Price Index (CPI) saw a slight uptick of just 0.1 percent.

According to the General Authority for Statistics (GASTAT), the annual inflation rate for May was driven primarily by rising housing-related costs. Prices in the housing, water, electricity, gas, and fuel sector increased by 6.8 percent compared to the same period last year. Food and beverage prices climbed by 1.6 percent, while personal goods and services saw a 4 percent rise.

Residential rents remained the most significant contributor to inflation, continuing their upward trend and exerting substantial influence on the general index. Despite this, the Kingdom’s inflation rate remains among the lowest in the G20.

Commenting on the data, Dr. Abdullah Al-Jassar, a member of the Saudi Association for Energy Economics, told Asharq Al-Awsat that Saudi Arabia’s inflation levels remain comparatively low on a global scale. He said the current rate reflects the flexibility and discipline of the national economy, noting that price increases have been modest and largely under control.

Al-Jassar attributed this to effective government policies that have helped shield both the market and consumers from external shocks.

He emphasized that the inflation observed is a result of real economic activity rather than external disruptions or internal imbalances. One of the most effective tools in curbing inflation, he said, has been the government’s decision to stabilize local energy prices, even as global oil prices surged. Since fuel plays a crucial role in the production, transport, and distribution of goods and services, this policy has prevented cost increases from spilling over into other sectors such as food, construction, and housing.

Al-Jassar described this approach as a “smart policy” that successfully absorbed global inflationary shocks before they reached the end consumer.

Although residential rents jumped 8.1 percent year-on-year, he noted that the rise was gradual and primarily driven by strong demand and limited supply. He also pointed out that the Saudi riyal’s peg to the US dollar has helped protect the economy from imported inflation and reduce the cost of importing goods.

Increased competition, tighter price monitoring, and the growing presence of e-commerce were also cited as factors contributing to market stability and limiting price manipulation across various sectors.

Looking ahead, Al-Jassar suggested inflation could see a slight increase in the second half of 2025, potentially rising to between 2.5 and 3 percent. He attributed this potential uptick to seasonal factors or changes in global commodity prices. Additionally, if the US Federal Reserve moves to cut interest rates, this could lead to looser monetary policy in Saudi Arabia, boosting liquidity and consumption—factors that might put upward pressure on prices. However, he stressed that there are currently no signs of any sharp or unexpected inflationary surges.

In April 2025, the inflation rate stood at 2.3 percent, also led by a 6.8 percent rise in housing and related costs. Food and beverages saw a 2.2 percent increase, while personal goods and services were up 3.5 percent.

Month-on-month data showed that while May’s CPI rose by just 0.1 percent, residential rents continued to rise, helping push housing-related prices up by 0.3 percent. Actual rents for residences alone increased by 0.4 percent. Food and beverages inched up by 0.1 percent, while personal goods and services rose by 0.5 percent. Tobacco prices edged up by 0.2 percent.