Türkiye | Steadily high inflation trend

Consumer prices rose by %2.24 m/m in November, higher than consensus (2.0%), with no improvement in the underlying inflation trend. Considering November realizations, we evaluate annual consumer inflation is likely to finish the year at around 45% and decline to 26.5% in 2025 on our assumption of an effective policy mix.

Key points

• Key points:
• We calculate that the underlying trend inflation (3-month average of seasonally adjusted monthly inflation) remained at 2.7% in November due to the acceleration in both food and core inflation.
• Core inflation slightly geared up on the back of an acceleration in basic goods inflation, despite the steady services inflation.
• Cost push factors remained weak as producer price inflation further slowed down to 0.66% m/m and 29.5% y/y on top of stable currency and weaker energy prices.
• Weaker than expected improvement in core trend inflation, high inertia on services prices, still unanchored inflation expectations and stronger demand conditions than supply pose upside risks on the inflation outlook, requiring the CBRT to remain prudent. Accordingly, we expect the monetary easing cycle to start with 100 bps rate cut in December 2024.
• Considering the current momentum, we evaluate that the annual consumer inflation will likely finish the year at around 45%. We expect annual inflation to fall to 26.5% on the expectation of better monetary and fiscal policy coordination in 2025 but the administrative prices, the final revaluation rate (currently determined as 43.93%) and minimum wage adjustment at the start of the year would be important factors on inflation outlook.

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