Turkey | Headline CPI stays at 11.77% in August

Consumer prices increased by 0.86% mom in August, leading the annual inflation to stay almost stable at 11.77%. Annual core inflation rose to 11.03% from 10.25%, reflecting gradual exchange rate pass-thru and the impact of the demand pull factors. We expect the headline inflation to be 11% at the end of 2020.

Key points

• Key points:
• Certain sub-items sensitive to both demand factors and exchange rate pass-thru kept the upward pressures on core prices alive but showed only a gradual pass-thru from the recent depreciation, which could be continuing in the coming months.
• Cost push factors and second round price effects maintain the potential for further stickiness.
• Domestic producer prices, which increased by 2.3% mom, confirmed the still alive cost push factors on the tighter financial conditions, the disruptions in production and the recent tax adjustments.
• We expect the headline inflation to converge towards 11% at the end of the year, which would require additional tightening from the Central Bank.

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