Turkey’s monthly inflation rate climbed more than expected to 5.03 per cent in January due to a minimum wage hike and several new-year price updates, while annual inflation fell to 42.12 per cent, data showed on Monday.

The monthly rise in the consumer price index (CPI) was above the 4.35 per cent forecast in a Reuters poll, and up sharply from 1.03 per cent in December. The central bank, which launched an easing cycle in December, had warned of the expected temporary jump.

By sector, the biggest monthly price rises were in health, goods and services and education and housing. On an annual basis, education, housing and health contributed to the rise last month, the Turkish Statistical Institute data showed.

Turks’ contribution fee for receiving health services in public and private hospitals rose by 233 per cent and 543 per cent respectively, driving the 23.6 per cent monthly increase in health prices.

Annual inflation has been falling since May, when it exceeded 75 per cent, as tighter monetary and fiscal policies curbed overheating domestic demand.

The central bank began cutting its interest rate from 50 per cent in December and trimmed it again to 45 per cent earlier this month, while pledging to maintain sufficiently tight policy to ensure continued disinflation.

“Although inflation exceeded expectations and core price trends increased significantly in January…(the bank) will likely proceed with a 250 bps rate cut” again in March, QNB economists said in a research note.

“However, if inflation exceeds the CBRT’s expectations in the coming months, the central bank may slow down or even halt the ongoing rate-cutting cycle.”

The central bank will update its inflation forecasts in a news conference on Friday this week.

While most taxes and fees have been updated in line with the standard inflation coefficient for 2025, the government limited a hike in fuel tax this month to 6 per cent as part of its disinflation efforts.

Finance Minister Mehmet Simsek said the monthly rise was due mainly to seasonal effects but managed prices determined in line with targets helped achieve the lowest January monthly inflation print in four years.

The government expects inflation to continue declining to stand around 20 per cent at the end of the year, according to Vice President Cevdet Yilmaz.

Monday’s data showed the domestic producer price index was up 3.06 per cent month-on-month in January for an annual rise of 27.20 per cent.