Türkiye | Slight improvement in inflation trend

Summary

Consumer prices rose by 3.43% m/m in October, lower than both our expectation (4.5%), resulting in an annual inflation of 61.36%. We expect consumer inflation to be realized closer to the upper bound of the Central Bank’s revised inflation projections in the near term if managed depreciation is preserved.

Key points

• Key points:
• Core prices (C index) remained strong increasing by 3.7% m/m, which led to an acceleration of annual core inflation to 69.8%.
• Goods prices inflation materialized weaker than expectations thanks to the managed depreciation in the currency and strong but relatively weaker cost-push factors, whereas inflation inertia remained strong as services prices increased to 88.6% on an annual basis.
• Led by slower than expected October realization and likelihood of postponing utility price hikes for households after the local election in March 2024, we now acknowledge slight downside risk on our current year-end inflation forecast of 70%.
• Preferences over the course of economic growth, depreciation pattern of the currency, wage adjustments, administrative price hikes and inflation expectations will be decisive on inflation outlook.

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