FX.co ★ Inflation drains voters' wallets ahead of elections in Turkey

A slowdown in inflation in Turkey is sending positive signals to markets, but the “sticky” nature of price growth does not allow one to speak of a quick end to the crisis. That is the conclusion of Turkish financial commentator Mahir Turan Yeşiltepe.

According to official data from the Turkish Statistical Institute (TÜİK), the annual CPI fell to 32.11% in June, while the monthly price increase was 0.99%, below consensus forecasts. The main source of inflationary pressure remains housing, energy, and utility expenses, which have jumped by more than 45% year‑on‑year.

Mahir Turan Yeşiltepe notes that the June data arouses hope for a slowdown, but it is premature for the authorities to relax. Inflation remains sky-high and extremely persistent. Even if the CPI drops to 28–29% by year‑end, the key question is whether the central bank can sustain this trend until the start of the general, presidential, and parliamentary elections in 2027.

Despite the cooling of the headline index, the cost of living for low‑income households continues to rise, as most of their budgets go to basic groceries and housing. The expert says that the June slowdown is due more to favorable external conditions — falling global energy and food prices — and an overall compression of domestic demand. With monthly inflation remaining close to 1%, true disinflation is still a long way off.

The central bank’s future strategy will depend directly on exchange‑rate policy, oil prices, and the actions of the US Federal Reserve. Yeşiltepe believes the current signs of slowing inflation could create room for cautious monetary policy easing in the coming months, although the regulator is likely to remain prudent. At the same time, the positive statistics can already support local markets, restoring investor interest in Turkish stocks, government bonds, and assets denominated in the national currency.