Türkiye Inflation Hits 75% in Expected Peak Before Relief

A view of produce for sale at a store in Istanbul, Türkiye, May 29, 2023. REUTERS/Hannah McKay/File Photo Purchase Licensing Rights
A view of produce for sale at a store in Istanbul, Türkiye, May 29, 2023. REUTERS/Hannah McKay/File Photo Purchase Licensing Rights
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Türkiye Inflation Hits 75% in Expected Peak Before Relief

A view of produce for sale at a store in Istanbul, Türkiye, May 29, 2023. REUTERS/Hannah McKay/File Photo Purchase Licensing Rights
A view of produce for sale at a store in Istanbul, Türkiye, May 29, 2023. REUTERS/Hannah McKay/File Photo Purchase Licensing Rights

Turkish annual consumer price inflation reached 75.45% in May, a bit above expectations, official data showed on Monday, in what is expected to be the high watermark before a series of rate hikes and relative lira stability bring relief.

The consumer price index rise was driven by strong advances in education, housing and restaurant prices last month, Turkish Statistical Institute data showed.

Monthly inflation is also expected to ease after May, when it was 3.37%, compared with 3.18% in April, the data showed. Annual inflation in April was 69.80%, Reuters reported.

Finance Minister Mehmet Simsek said "the worst is over" and relief will begin this month. "The transition period in the fight against inflation is completed, we are entering the disinflation process," he said on X.

In a Reuters poll, annual inflation had been forecast to peak at 74.8% in May, its highest level since November 2022, before dropping to 42.6% by the end of 2024. Forecasts for month-on-month price rises ranged between 2.7% and 3.3%.

The central bank has raised its policy rate (TRINT=ECI), opens new tab by 4,150 basis points since June last year and vowed to tighten more if there is "a significant and persistent deterioration" in the outlook.

It last raised rates in March, by 500 basis points to 50%, citing a worsening inflation outlook, and has since held steady.

The tightening marked a dramatic reversal of years of monetary stimulus that was championed by President Tayyip Erdogan to boost growth, but which sent inflation soaring and sparked a years-long cost-of-living crisis for Turks.

As a result the lira , steady on Monday, has skidded to 32.25 to the dollar from 5.7 five years ago. It is down more than 8% this year but held mostly steady since March, helping underpin the expected inflation relief.

"We're confident that inflation has now reached a peak but, with today's release containing a few unpleasant surprises, the pace of disinflation in the second half of the year is looking a bit more uncertain," Capital Economics said in a nod to the higher-than-expected print.

The domestic producer price index was up 1.96% month-on-month in May for an annual rise of 57.68%, the data showed.

The policy reversal has drawn foreign investor interest and helped boost the central bank's foreign reserves, which are at the highest level since December on a net basis.

International investors are ramping up exposure to Turkish local bonds and credit default swaps. JPMorgan said it had moved its allocation to Turkish domestic government bonds to "overweight", citing increasing confidence in the policy.

Last month, the central bank nudged up its year-end inflation forecast to 38% and said it would "do whatever it takes" to avoid any longer-term deterioration in the outlook.



OPEC Again Cuts 2024, 2025 Oil Demand Growth Forecasts

The OPEC logo. Reuters
The OPEC logo. Reuters
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OPEC Again Cuts 2024, 2025 Oil Demand Growth Forecasts

The OPEC logo. Reuters
The OPEC logo. Reuters

OPEC cut its forecast for global oil demand growth this year and next on Tuesday, highlighting weakness in China, India and other regions, marking the producer group's fourth consecutive downward revision in the 2024 outlook.

The weaker outlook highlights the challenge facing OPEC+, which comprises the Organization of the Petroleum Exporting Countries and allies such as Russia, which earlier this month postponed a plan to start raising output in December against a backdrop of falling prices.

In a monthly report on Tuesday, OPEC said world oil demand would rise by 1.82 million barrels per day in 2024, down from growth of 1.93 million bpd forecast last month. Until August, OPEC had kept the outlook unchanged since its first forecast in July 2023.

In the report, OPEC also cut its 2025 global demand growth estimate to 1.54 million bpd from 1.64 million bpd, Reuters.

China accounted for the bulk of the 2024 downgrade. OPEC trimmed its Chinese growth forecast to 450,000 bpd from 580,000 bpd and said diesel use in September fell year-on-year for a seventh consecutive month.

"Diesel has been under pressure from a slowdown in construction amid weak manufacturing activity, combined with the ongoing deployment of LNG-fuelled trucks," OPEC said with reference to China.

Oil pared gains after the report was issued, with Brent crude trading below $73 a barrel.

Forecasts on the strength of demand growth in 2024 vary widely, partly due to differences over demand from China and the pace of the world's switch to cleaner fuels.

OPEC is still at the top of industry estimates and has a long way to go to match the International Energy Agency's far lower view.

The IEA, which represents industrialised countries, sees demand growth of 860,000 bpd in 2024. The agency is scheduled to update its figures on Thursday.

- OUTPUT RISES

OPEC+ has implemented a series of output cuts since late 2022 to support prices, most of which are in place until the end of 2025.

The group was to start unwinding the most recent layer of cuts of 2.2 million bpd from December but said on Nov. 3 it will delay the plan for a month, as weak demand and rising supply outside the group maintain downward pressure on the market.

OPEC's output is also rising, the report showed, with Libyan production rebounding after being cut by unrest. OPEC+ pumped 40.34 million bpd in October, up 215,000 bpd from September. Iraq cut output to 4.07 million bpd, closer to its 4 million bpd quota.

As well as Iraq, OPEC has named Russia and Kazakhstan as among the OPEC+ countries which pumped above quotas.

Russia's output edged up in October by 9,000 bpd to about 9.01 million bpd, OPEC said, slightly above its quota.