**Turkey’s Inflation Anticipated to Surge Amid Political Turmoil: Implications for Forex Traders**

ISTANBUL (Reuters) – Forex traders should brace themselves as Turkey’s monthly inflation rate is projected to rise to 3.1% in April, influenced primarily by escalating energy prices and the depreciation of the lira following political unrest. This insight comes from a recent Reuters poll of economists.

The median prediction from 11 analysts reflects a rise from March’s 2.46%. The estimates ranged widely, from 2.80% to 3.60%, highlighting uncertainty among economists regarding the inflation trajectory. For the year, the inflation rate is expected to dip to 38%, with forecasts indicating a narrow range between 37.6% and 38.7%.

In a recent move, Turkey has raised electricity prices by 25% for residential use and 10% for industrial consumption, while natural gas prices saw increases of 20% for industrial use and 24.2% for electricity producers. Given the significant role energy prices play in the inflation basket, this rise alone is estimated to contribute an additional 0.5% to overall inflation.

Additional pressures on inflation stem from unprocessed food prices—particularly fruits and red meat—as well as automotive prices, which are heavily influenced by currency fluctuations.

In March, the Turkish lira faced significant pressure, declining by as much as 12% to reach 42 against the U.S. dollar after the arrest of Istanbul Mayor Ekrem Imamoglu, a key political opponent of President Tayyip Erdogan. Although the currency recovered much of its losses due to measures implemented by the central bank, it has remained around 38, which reflects a 4.6% depreciation since the mayor’s incarceration.

The central bank has responded to these market fluctuations with aggressive monetary tightening, raising its policy rate by 350 basis points to a lending rate of 49%, while also selling approximately $50 billion in foreign reserves to stabilize the market. In total, these measures represent a tightening of 700 basis points since the political crisis began. This comes after an earlier easing cycle when the central bank cut rates to 42.5%, reflecting a decline in inflation from previous highs exceeding 75% in mid-2024.

March’s inflation figures showed a month-on-month increase of 2.46%, marking a slowdown relative to previous expectations, with year-on-year inflation reported at 38.1%. Poll data indicates a more optimistic outlook for the end of the year, forecasting inflation to ease to 30.5%.

The central bank’s monetary policy meeting minutes noted signals pointing to a rising underlying inflation trend in April, with price increases seen in durable goods often subject to exchange rate volatility. Finance Minister Mehmet Simsek has acknowledged deteriorating inflation expectations but remains confident that no lasting damage will occur, as official forecasts suggest inflation may align with the central bank’s target.

The central bank aims for a year-end inflation midpoint of 24%, capping it at 29%. Forex traders should be prepared for the upcoming inflation data release from the Turkish Statistical Institute scheduled for 0700 GMT on May 5, which could provide essential insights into currency movements and market sentiment.

As political and economic dynamics evolve, forex investors should keep a close watch on Turkey’s inflation trends and the lira’s responsiveness to further central bank interventions and governmental decisions.