Turkey’s inflation story in November reflected both challenges and progress. The food group continued to dominate as the primary driver of rising inflation, echoing October’s trend. However, a silver lining emerged as the annual inflation rate continued its downward trajectory, hinting at gradual improvements. While monthly figures surprised on the upside, underlying trends suggest a slow but steady path toward stabilization.
November Inflation: A Closer Look
November’s inflation rate in Turkey climbed to 2.2%, surpassing market expectations of 1.9%. This figure also exceeded forecasts by key analysts, who anticipated 1.8%. However, the annual inflation rate dropped to 47.1% from October’s 48.6%, supported by favorable base effects from the previous year, when inflation stood at 3.3%. This marked a continuation of the declining trend, though cumulative inflation for the year is now slightly above the Central Bank of Turkey’s (CBT) revised target of 44%.
The Producer Price Index (PPI) also reflected easing pressures, increasing by only 0.66% month-on-month. Year-on-year, PPI declined to 29.5%, driven by reduced energy costs and a stable currency. Still, experts caution that global commodity and oil prices could influence PPI trends in the near future, given geopolitical uncertainties.
Food Prices: The Persistent Challenge
Food prices once again topped the list of inflationary pressures in November, contributing 1.23 percentage points to the overall figure. Unprocessed food inflation surged significantly, marking a 9% increase compared to just 0.3% last year. This steep rise was recorded as the highest November figure in Turkey’s current inflation series. Processed food prices, however, moderated, growing by 1.6%, down from 4.9% in 2023.
Monthly food inflation stood at 5.1%, reinforcing its role as the most significant contributor to November’s higher-than-expected inflation rate. Analysts warn that food inflation remains a critical issue for Turkey’s disinflationary efforts, with persistent pricing behaviors needing further attention.
Housing and Household Equipment: Secondary Drivers
The housing sector emerged as the second-largest contributor, adding 0.4 percentage points to the inflation rate. Rent increases, though still impactful, showed signs of deceleration, a trend likely to continue into December. This aligns with the Central Bank’s guidance indicating slowing rent inflation.
Household equipment came in third, contributing 0.21 percentage points. While its impact was smaller, the category reflects broader trends in domestic demand and consumer spending patterns, which are critical for understanding Turkey’s inflation dynamics.
Core Inflation and Underlying Trends
Core inflation (CPI-C), often a more stable measure, rose by 1.5% month-on-month, marking its lowest monthly reading since late 2021. On an annual basis, it aligned with the headline rate at 47.1%, benefiting from easing producer price trends and a relatively stable exchange rate.
The underlying inflation trend remains on a gradual downward path. Seasonally adjusted indicators suggest November’s progress was driven by both goods and services, hinting at an ongoing shift toward disinflation. However, services inflation, at 67.9% year-on-year, continues to pose challenges due to domestic demand and wage pressures.
Policy Outlook: What Lies Ahead
Turkey’s monetary tightening appears to be contributing to the disinflation trend. The CBT has hinted at a potential rate-cutting cycle, possibly beginning in December. However, any cuts will be closely tied to both realized and expected inflation, ensuring that real rates remain positive.
Market analysts predict a 250-basis-point cut in the coming month, though higher-than-expected inflation in November might temper this move. The CBT’s revised projections now push significant improvements in inflation to the third and fourth quarters of 2025, reflecting a longer-than-anticipated timeline.
Gradual Progress Amid Persistent Challenges
Turkey’s inflation landscape in November showcases a blend of challenges and cautious optimism. While food prices and services inflation remain significant hurdles, easing cost pressures and a stable currency provide a foundation for continued progress. Policymakers face a delicate balance: supporting disinflation without stifling economic growth. As the Central Bank fine-tunes its strategy, the coming months will be critical in determining whether Turkey can sustain its gradual path toward stability.
