Turkey | April CPI implied weak currency pass-thru

Consumer prices increased 1.68% in April resulting in an annual inflation of 17.1% (up from 16.2% the month before). We maintain our year-end inflation forecast at 15% and expect the CBRT to start an easing cycle only very gradually in September.

Key points

• Key points:
• Domestic producer price inflation once again surprised on the upside with 4.3% mom increase (35.2% yoy) confirming increasing cost-push factors and uncertainties.
• Core C prices annual inflation continued to increase (17.8% yoy, the highest level since April 2019) where recent depreciation in currency and accelerating cost push factors seem to have weaker impact so far.
• Deepening cost push factors, potentially delayed exchange rate pass-thru impact and uncertainties in price adjustments once the economy is reopened (sticky services prices due to low capacity rules) might still result in a worsening inflation outlook.
• All in all, if the potential impact of the reopening in the economy is also considered, we believe the uncertainty on inflation outlook has increased further, given the delayed demand and cumulated supply-side factors.

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