Turkey’s official consumer price index (CPI) inflation was recorded at 58% y/y in January, the Turkish Statistical Institute (TUIK, or TurkStat) said on February 3 (chart).

The official rate peaked in October at 86%, the highest headline rate posted by Turkey since the 91% registered in June 1998. With the advent of December, the base effect from a year ago came into effect, pulling inflation down.

At 58%, Turkey remains in seventh place in the world inflation league.

The Istanbul-based ENAG inflation research group of economists, meanwhile, released an inflation figure of 122% y/y for January.

TUIK also gave an official figure of 87% y/y for January producer price index (PPI) inflation.

In January, the central bank left its expectation for end-2023 official inflation unchanged at 22% (upper boundary: 27%).

The guidance was based on the assumption that the lira will not experience another crash. As of January 19, the USD/TRY pair was weaker by 1% at TRY 18.8 from 18.6 on October 27.

If the USD/TRY remains stable, Turkey’s official inflation figure is set to decline to the 30-40%s across 2023.

In November, the central bank’s monetary policy committee (MPC) cut its policy rate to 9%. The December and January MPC meetings passed with no action.

On February 1, Turkey’s president, Recep Tayyip Erdogan, said that Turkey will cut its monetary policy rate further.

On February 23, the MPC is scheduled to hold its next rate-setting meeting.

Turkey's policy rate and central bank essentially remain idle on the sidelines. The Erdogan administration conducts monetary policy via macroprudential measures and non-capital controls.

Amid the booming lira supply and hard currency outflows via record trade deficits, Turkey’s lira remains stable thanks to sticks held to the exposed backs of bankers by officials who demand the blocking of domestic FX demand. Also supportive are unidentified inflows and support from “friendly countries.”

There are three months left until the presidential and parliamentary elections. Another lira tragedy would not come as a surprise. It could happen at any time.

The Erdogan regime is aiming to keep the lira stable prior to the polls. The elections will not be fair and this curious strongman will declare another puzzling victory. But he's got his work cut out to get there.

The turbulence-free mood on the global market continues. Turkey’s five-year credit default swaps (CDS) remain below the 600-level, while the yield on the Turkish government’s 10-year eurobonds remains below the 10%-level.