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This article was originally written for Türkiye Today’s weekly economy newsletter, Turkish Economy in Brief, in its June 1 issue. Please make sure you are subscribed to the newsletter by clicking here.
The chaos that began in the Middle East in March and the closure of the Strait of Hormuz pushed oil prices higher, fueling inflation in Türkiye and around the world.
Monthly consumer inflation (CPI), which stood at 1.9% in March, rose to 4.2% in April. Attention now turns to the May CPI data, which will be released on Friday, June 5.
Although uncertainty in the Middle East persisted in May, the preservation of the ceasefire and growing optimism about a possible agreement between the parties prevented further increases in oil prices.
In fact, Brent crude prices fell 17.1% last month to $91.9 per barrel. As a result, the four-month streak of rising oil prices came to an end in May.
Alongside partial reductions in fuel prices in Türkiye, energy inflation followed a more moderate path from April to May.
Food prices have also shown notable declines as summer begins to take effect. Prices of some products reportedly fell by as much as 50% during May, supporting more optimistic expectations for the inflation figures.
According to the Central Bank of the Republic of Türkiye's (CBRT) Market Participants Survey released in mid-May, monthly CPI is expected to rise by 1.9% in May.
Akbank Economic Research's final calculations suggest monthly CPI could come in at 1.50%. Akbank Chief Economist Cagri Sarikaya noted that "with corrections in food and energy items, which made strong contributions to inflation in April, monthly inflation is slowing sharply in May."
Gedik Investment also projects monthly CPI growth of 1.55% in May, which would imply annual inflation remaining broadly stable at around 32.4%.
The report highlighted that energy inflation could even turn slightly negative in May due to lower gasoline and diesel prices. It also noted expectations for a significant slowdown in food inflation, which reached 3.7% in April. Thanks to double-digit declines in vegetable prices, headline food inflation is projected at around negative 0.6%.
Forecasts for May suggest a substantial improvement compared with April's 4.2% monthly inflation reading.
The picture will become clearer once the official data is released on Wednesday. However, Gedik Investment's assessment that annual CPI could approach 30% by the end of 2026 due to elevated commodity prices also serves as a reminder that the fight against inflation may remain a long-term challenge.
Early June will also bring the first clear signals regarding Türkiye's economic growth performance. The Turkish Statistical Institute (TurkStat) will release first-quarter gross domestic product (GDP) figures. Economists surveyed by AA Finans expect GDP to expand by 2.7% in the first quarter.
Meanwhile, the CBRT's Monetary Policy Committee is scheduled to meet on June 11. The central bank kept its policy rate unchanged at 37% at its last meeting, although market funding continues to take place through the upper band of the interest-rate corridor at 40%.
The inflation and growth data, together with developments in the Middle East and the latest reserve trends, are expected to be key factors in the central bank's upcoming interest-rate decision.
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