Türkiye | January CPI surprised to the upside

Consumer prices rose by 6.65% in January, significantly above both our expectation of 4%, while annual CPI slowed down to 57.7% on favorable base effects. We expect annual CPI to come down to 40-45% just before the elections and reach 42% by year end.

Key points

• Key points:
• Core inflation skyrocketed in January to 7.7% m/m (1.86% m/m prev.), recording the highest monthly increase since December 2021 (13.2% m/m).
• Services inflation contributed to soaring core inflation with 12.7% m/m (62.4% y/y) mainly on the back of wage adjustments following minimum wage hike in the previous month, second round effects and strong demand.
• While food prices drastically picked up with 6.6 m/m (1.9% m/m prev.), increase in energy prices was relatively limited with 1.6% m/m, which stemmed from some ease in energy prices.
• Despite almost stable currency, robust demand and continuing cost push factors continue to keep inflationary pressures, which turn out to feed second round effects and reinforce inertia further.
• The deterioration in trend inflation continues and it already reached above 26% in January. This worsening may continue in the short term converging near 30%, which signals that decreasing inflation below 30% would be very challenging without a strictly clear commitment against inflation.

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