Türkiye | Base effects start to help annual CPI

Consumer prices rose by 2.9% in November (vs. 3% both consensus and our exp.), leading to limited decline in annual inflation figure of 84.4% (85.5% prev.). We forecast 2022 year end inflation to be 67% given the recent favourable base effects and the Government’s efforts to maintain manageable currency depreciation.

Key points

• Key points:
• Domestic producer prices grew very mildly by 0.7% m/m, showing a strong, unusual pass-thru from lower energy prices and rose 136% y/y.
• Core prices inflation slowed-down to 1.9% m/m due to mainly basic good prices, recording its lowest increase since June 2021, despite continuing cost push factors, high exchange rate pass-thru and still strong demand.
• Despite the slow down in monthly services inflation, annual figures still rose to 60.7% y/y, signaling clear signs of inflation inertia.
• Private consumption remains to be the main driver on domestic demand which could be boosted further by counter-cyclical policies ahead of the elections. Strong demand along with the weakening production will likely keep inflationary risks alive.
• Given the recent weaker inflation realizations and the Government’s efforts to maintain a manageable currency depreciation, we forecast inflation to be 67% at the end of 2022 and remain above 40% throughout 2023 with a year-end level of 42%.

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