FX.co ★ Turkey’s authorities still cannot protect households’ incomes from soaring inflation

Turkey’s authorities once again have to manage the situation with rampant consumer inflation. President of Turkey Recep Tayyip Erdoğan affirms that he will not allow inflation to hit the population. Let’s wish him good luck in this endeavor!

Earlier, the policymaker spoke about protecting citizens in response to a question about a potential increase in the minimum wage starting from January 1, 2025.

In his comments, Recep Tayyip Erdoğan referred to the forecast of the Central Bank of Turkey. According to the regulator's estimates, the annual inflation rate in the country could surge to 44% by the end of 2024.

In particular, the President of Turkey reminded journalists about the last increase in the minimum wage, which has surpassed the current inflation rate by the end of this year. He pointed out that the Turkish government would follow a similar strategy next year. Notably, Recep Tayyip Erdoğan's comments had an impact on the national currency's dynamics. As a result, the lira’s exchange rate reached 34.46 to 1 US dollar.

In its latest inflation report, the Central Bank of Turkey stated that consumer inflation was expected to drop to 21% by the end of 2025. Meanwhile, the annual inflation rate stands at 48.58% this year due to the hawkish monetary policy.

Analysts believe that Ankara should not relax in its crusade against inflation. At the end of this year, turbulence may flare up in anticipation of another rise in the minimum wage. A considerable wage hike will help employees offset the real losses in income. However, there are potential pitfalls, as such a scenario would drive labor costs up.