Turkey's Disinflation Slows Due to War and Domestic Factors

Türkiye's Treasury and Finance Minister Mehmet Şimşek said that while the country's disinflation process has been successful, it is moving more slowly than desired due to domestic and external factors. The annual consumer price index (CPI) in Türkiye eased for the third consecutive month in August to 31.5%, from 31.8% in July.

Şimşek attributed the slowdown in disinflation to the war, which has affected not only oil and natural gas prices but also commodity prices more broadly, creating stronger pressure on Türkiye's economy because its inflation rate remained relatively high. He said that if there had been no war this year, inflation would be at least 7 percentage points lower as of today.

The government's targets are largely on track, with the Medium-Term Program (MTP) projecting a year-end inflation of 28.4%, compared to 16% estimated last year. Officials said the war in the Middle East had played a key role in the upward revision.

Şimşek emphasized that disinflation does not mean prices are falling, but rather that the pace of price increases is slowing. He said monetary policy has been more effective in reducing core goods inflation, and services inflation has also begun to respond, although it initially showed considerable inertia.