Turkey | Inflation ended 2019 at 11.8%

Consumer prices increased by 0.74% in December, beating the consensus estimate of 0.4%; led the annual CPI to end 2019 at 11.84%. In absence of shocks, Consumer inflation could stay between 11-12% in 1Q20 before experiencing levels close to 10.5% in 2Q20. We expect inflation to be 8.5% at the end of 2020.

Key points

• Key points:
• Unfavorable base effects in the last two months of the year pioneered the rise in the annual figure, apart from the higher seasonal factors.
• Still negative output gap, more stabilized currency, ease in cost push factors and more favorable administrative prices continue to be the supporting factors for disinflation.
• High volatile conditions both locally and globally, stickiness on inertia and inflation expectations and recent slow but promising recovery in domestic demand could be the main challenges on inflation outlook.
• Central Bank (CBRT) should decelerate rate cuts in order to maintain a reasonable real interest rate to ensure prudency.

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