Turkey’s Inflation Drops to Lowest Level in a Year and a Half, Mehmet Simsek Appointed as Finance Minister

Turkey’s annual inflation fell to 39.59 percent in May, the lowest level in about a year and a half, largely in line with expectations for the month in which President Recep Tayyip Erdogan won a re-election month.

Consumer prices rose in May by 0.04 percent from the previous month, compared to expectations for a 0.2 percent decline in a Reuters poll.

The poll had forecast consumer price inflation to rise 39.2 percent year on year and is expected to reach 45 percent by the end of the year.

Inflation worsened due to the lira crisis, which began at the end of 2021, and reached its highest level in 24 years, when it reached 85.51 percent last October.

The domestic producer price index rose 0.65 percent month-on-month in May, recording an annual increase of 40.76 percent, according to data from the Turkish Statistical Institute.

The Turkish lira fell by about one percent, on Monday, to record 21 lira per dollar, in a fragile first reaction to the appointment of Mehmet Simsek, who is highly regarded, as Minister of Finance in Turkey.

The Turkish lira traded at 21.1 against the dollar in the Asian financial markets. The price was not far from the record low level it recorded against the dollar last week, as it reached 21.8 per dollar.

Observers believe that the appointment of Simsek may put an end to the unconventional economic policies that have been going on for years under Erdogan’s rule, which were characterized by lowering interest rates despite high inflation rates and the state’s control of the markets.