Turkey’s official annual inflation rate for April was on May 3 released at the slightly smaller-than-expected figure of 69.8% y/y, edging up from 69.5% y/y in March to the highest figure seen since late 2022. Ahead of the publication of the data, the market was expecting 70.3%.

Monthly inflation in April was 3.2% m/m, just as it was in March, according to the Turkish Statistical Institute (TUIK, or TurkStat).

Istanbul-based inflation research group ENAG calculated the April inflation rates at 124.4% y/y and 5.0% m/m. Its calculations for March were 124.6% y/y and 5.7% m/m.

Liam Peach at Capital Economics said: “With the impact of the large minimum wage hike in January probably having passed through and the central bank tightening monetary conditions even further in March with a 500bp rate hike [to a benchmark of 50% compared to 8.5% eight months previously at the start of the monetary tightening cycle], the hope is that m/m inflation will soon fall towards the 2.0% rates that are needed for the central bank to have any chance of achieving its 36% year-end inflation forecast.

“We think that inflation will fall in the second half of this year, but we are not quite as optimistic on the pace of disinflation (our year-end forecast is 41%). Against this backdrop, we still don’t expect the central bank to shift to cuts until next year.”

Peach noted that a large part of the downward surprise in inflation came from food prices, which in April officially rose by 2.8% m/m, the joint-lowest figure seen in a year.

Sectors that saw strong inflation in April included education, restaurants and hotel prices.

The official domestic producer price index (PPI) was up 3.60% m/m in April for an annual rise of 55.66% y/y, the TUIK data also showed.

Turkish Finance Minister Mehmet Simsek said on X: "After annual inflation reaches its peak in May, it will begin to decline sharply in line with our predictions."

Selva Bahar Baziki, an economist at Bloomberg Economics, said: “Turkey’s April inflation surprised to the downside, but underlying dynamics still warrant a more restrictive stance from the central bank. We see policymakers delivering the necessary tightening through alternative tools rather than an interest rate hike.”

In January and February, official monthly inflation climbed 6.7% m/m and 4.53% m/m, respectively, with the big minimum wage a key driver.

The central bank sees annual inflation peaking at around 73-75% in May. Turks, however, see inflation at 96% at the end of the year, according to a survey by Koc University researchers and pollster Konda. The figure is more than double the forecast of financial market participants that took part in a recent central bank poll.