(Bloomberg) -- Turkey won’t undermine next year’s inflation forecast when increasing taxes on fuel and tobacco, Treasury and Finance Minister Mehmet Simsek said.
The government will continue to show “maximum sensitivity on administered prices” in the new year, just as it has this year, Simsek told reporters on Sunday in the southeastern town of Sanliurfa, where officials announced new support for a decades-old infrastructure project in the region.
The tax increases “will be set in a way so as not to endanger” the central bank’s 2025 inflation outlook, he said.
Turkish officials have been discussing bypassing tax increases on some goods at the start of the new year to help quell inflation, Bloomberg reported in October. That comes as policymakers have highlighted the impact rising levies on fuel have had on monthly inflation. Holding them at their current level could help keep price growth under control and aid the central bank’s efforts at achieving its shorter-term targets, people with knowledge of the plans said at the time.
Turkey is due to announce December inflation on Friday. Annual consumer prices are expected to slow to around 45% from 47% the prior month, according to a survey of 17 economists.
Simsek also said that goods and services subject to a so-called revaluation rate set by the government, such as passport application fees, largely have minimal or no impact on inflation. The government set its revaluation rate for those prices at 43.9% for 2025.
Tax hikes on goods with administered prices directly set by the government and the 2025 minimum-wage adjustment have been a focus of investor scrutiny because of their potential impact on inflation. A 30% increase in the monthly minimum wage was announced last week, within the range of market expectations and central bank’s inflation outlook.
The central bank, which lowered the benchmark interest rate to 47.5% from 50% last week in its first cut in nearly two years, aims to reduce annual inflation to 21% by the end of 2025.
--With assistance from Ercan Ersoy.
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