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Year-on-year inflation in Turkey hit 68.5% in March, marking an increase from last month’s figures when it stood at 67%. This is according to data from the Tuik National Statistics Institute, according to which the price increase reached 3.16% from February to March. Inflation grew mainly in education (104.07%), hotels, cafes and restaurants (94.97%), healthcare (80.25%), transport (79.92%) and non-food and beverage alcoholic (70.41%).
The Turkish opposition party’s strong victory in Sunday’s local elections highlights voters’ frustration with high inflation, which has started to rise again in March data, according to Liam Peach, an economist at Capital Economics. “We believe it should be interpreted as a positive thing for investors, as it strengthens politicians’ commitment to rebalancing the economy,” he writes in a note.
Inflation averaged 48% year-on-year over 2021-23 and was at 68.5% in March this year, with the media and commentators attributing the losses of President Erdogan’s AKP to the worsening cost of livingosserva Peach.
Another interest rate hike by the central bank is likely this month, after Finance Minister Simsek reassured investors that policy austerity will continue, with further fiscal tightening to reduce inflation, Peach says .
According to analyst Bartosz Sawicki of fintech firm Conotoxia, containing price pressure remains key to strengthening confidence and aiding the lira’s recovery. But in the short term the currency will continue to slide, forcing the central bank to make further rate hikes. A forecast shared by Nicholas Farr, economist for emerging Europe at Capital Economics. The central bank unexpectedly raised its key rate last month in the face of inflationary pressure, after previously signaling it would leave rates on hold. While March’s monthly increase was less sharp, it still remains a long way from policymakers’ target, Farr wrote in a note.