Turkey | Annual consumer inflation reached 15.6%

Summary

Consumer prices increased by 0.91% bringing the annual inflation up to 15.6% from 15% in January. We keep our year end annual inflation forecast of 10.5% but acknowledging with upside risks due to stronger commodity prices, high inertia and cost push factor.

Key points

• Key points:
• Food inflation materialized as 2.5% mom, resulting in annual food inflation of 18.7%. The stabilization in currency and some moderation in domestic demand led core prices to rise by only 0.44% mom, led annual core inflation still to jump to 16.2% on base effects.
• High inertia persisted as annual services inflation further rose to 11.74% while cost push factors got stronger as domestic producer prices increased by 1.2% mom, resulting in 27.1% yoy increase.
• We expect some ease from currency pass-thru however stronger commodity prices and potential rises in unit costs after the re-opening of the economy raise uncertainties over the inflation outlook.
• If not compensated by exchange rate effects, we calculate 1.5pp upside risk on our current CPI forecast (10.5% year-end), led by the recent pressures from oil prices.
• Considering the need for restoring credibility, the CBRT might need to act by either additional tightening or staying tight for longer.

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