Real Exchange Rate Based on CPI Reaches 46-Month High in December with Limited Increase

In December, the real exchange rate index of the Turkish Lira showed a limited increase for the fourth consecutive month, reaching its highest level in the last 46 months. According to data published by the Central Bank of the Republic of Turkey (CBRT), the real effective exchange rate index was calculated at 97.12 points in December, reflecting a 0.15% increase based on the Consumer Price Index (CPI). This marks the highest value since February 2021, when it was recorded at 68.80.

The CPI-based real exchange rate index was revised from 67.03 points in November to 67.02 points.

• Based on the Producer Price Index (PPI)... The PPI-based real effective exchange rate index decreased by 0.2% in December, reaching 96.65 points. The index for the previous month was revised from 96.42 points to 96.88 points.

The real effective index based on developing countries fell from 53.91 points to 53.81 points, while the real effective index based on developed countries increased from 77.59 points to 77.94 points.

The nominal effective exchange rate is calculated based on a basket of currencies from countries that have a significant share in Turkey's foreign trade, representing the weighted average value of the Turkish Lira (TL).

The increase in the real effective exchange rate indicates that the Turkish Lira has appreciated, suggesting that the prices of Turkish goods have risen in comparison to foreign goods.