Consumer price inflation in Türkiye moderated further in June, official data showed Wednesday, as the downward trend continues at a slower pace.

Prices climbed 38.21% last month compared with a year earlier, down from May's 39.59% year-over-year increase, due in part to base effects, according to the Turkish Statistical Institute (TurkStat) data.

The June reading marks the lowest level since December 2021, when inflation stood at 36.08%, before rising to above 85% in October 2022, a 24-year high.

The annual reading recorded more than a 4-point drop in May after Ankara's provision of free natural gas that month offset other price rises.

Prices increased 3.92% from May to June, TurkStat said, its highest level since January, after a steep decline in the Turkish lira. It is up sharply from a 0.04% rise from April to May.

Annual and monthly figures both came in below market expectations. A median of estimates in a Reuters poll predicted inflation would reach 4.84% month-over-month. The poll had forecast that annual consumer price inflation (CPI) would be 39.47% and is expected to end the year at 51.5%.

Türkiye's economic authorities have taken steps since President Recep Tayyip Erdoğan was reelected on May 28 to combat inflation, including changing course after two years of monetary easing.

The country's central bank increased its benchmark policy rate by 650 basis points last Thursday, lifting its one-week repo rate to 15%, and called it the "first step" to curb inflation.

The monetary authority has also simplified some of the macroprudential measures it had implemented in a drive to boost the Turkish lira.

The decline in the lira, which has fallen some 30% this year, is reflected in domestic prices, stoking inflation in the import-dependent country.

The central bank has promised more "gradual" tightening, adding that indicators indicate a rise in the underlying inflation trend.

The inflation surged in late 2021 amid a depreciation in the lira after the country opted for an easing drive that saw its central bank slash its key policy rate to 8.5% from 19% in 2021.

Erdoğan reshuffled his economic team after reelection, bringing in Mehmet Şimşek, the respected veteran policymaker, as treasury and finance minister, and Hafize Gaye Erkan, a former Wall Street banker, as central bank governor.

In his remarks after the rate hike, Şimşek said predictable economic policies based on the market economy, a free exchange rate regime and an inflation-targeting model would enable capital inflows and stabilize the lira.

Analysts say the pass-through effect of the lira depreciation as well as a minimum wage hike as of July, will push inflation higher in the coming months, even though tighter monetary policy could limit the increase in prices.

"Apart from base effects and lower energy prices, the decline in headline inflation year-to-date was driven by FX stability keeping tradable inflation low until the election," Goldman Sachs said in a note to clients.

"Although the policy has turned tighter since the elections, further FX weakness is likely to aggravate core inflation going forward," including an expected 34% rise in the minimum wage and other civil servant wage rises, it said.

Core inflation, which excludes volatile items, rose an annual 47.3% from 46.6% the previous month, signaling that price pressures remain elevated.

The domestic producer price index was up 6.50% month-over-month in June for an annual rise of 40.42%, according to the TurkStat data.

The monthly CPI rise was the highest since January when it jumped 6.65% after the last hike to minimum wage.

Every month, the most considerable CPI increase in June was seen in alcoholic beverages and tobacco prices, which rose 11.13%, while transportation prices increased 7.96%.

Annually, the prices of restaurants and hotels rose the most, by 67.22%, followed by the health sector prices at 65.69% and food and nonalcoholic beverages at 53.92%.