Annual Inflation Slightly Decreased in April Despite MoM Hit 3.0% Due to High FX Pass Through
Bottom line: Turkish Statistical Institute (TUIK) announced on May 5 that the inflation softened to 37.9% y/y in April from 38.1% y/y in March. We think monetary tightening and suppressed wages helped relieve the price pressure despite hikes in electricity and natural gas prices in April, and currency volatility after Istanbul mayor Imamoglu’s arrest on March 23 caused the spike in the monthly inflation to 3.0% in April.
Figure 1: CPI, Core Inflation (YoY, % Change) and Policy Rate (%), January 2018 – April 2025
Source: Continuum Economics
The deceleration trend in inflation continued in Turkiye in April, and inflation rate softened for eleven consecutive months, marking its lowest level since December 2022. CPI cooled off to 37.9% y/y April from 38.1% in March with education and housing prices leading the rise in the index. MoM inflation rose by 3.0% in April, higher than 2.46% MoM inflation the previous month. Core inflation rose by 3.1% MoM, bringing the annual rate down to 36.8%. PPI came in 2.8% MoM, showing a drop to 22.5% on same month of the previous year basis.
Education prices recorded the highest annual increase with 79.2% YoY followed by housing prices were up by 74.1% YoY. Prices rose at a slower pace across a number of categories, such as footwear and clothing, which came in at 16.9% YoY in April. Communications and transport prices were up by 21.3% YoY and 22.8% YoY, respectively.
We think lagged impacts of previous monetary tightening and less-than-expected hike in minimum wage in January continue to relieve the price pressure in April. Despite this, hikes in electricity and natural gas prices in April, and currency volatility after Istanbul mayor Imamoglu’s arrest on March 23 caused the spike in the monthly inflation to 3.0% in April. (Note: Electricity prices were lifted by 25% for residential use and 10% for industrial use while natural gas prices were increased by 20% for industrial use and 24.2% for electricity producers).
Speaking about the inflation figure, Treasury and Finance Minister Mehmet Simsek said that “Although inflation expectations have been deteriorated the government does not expect permanent damage adding that inflation is seen to remain within the central bank’s target path.”
We think May inflation could also be higher-than-expected due to high FX pass through after Imamoglu’s arrest coupled with hikes in electricity and natural gas prices and unpredictable outlook for the global economy particularly Trump tariffs continue to pose risks.