Turkey | Consumer inflation surprised on the upside

Summary

Consumer prices increased by 1.68% in January, again surprising on the upside (1% BBVA Research, 1.4% Consensus). Annual inflation accelerated to 14.97%, up from 14.6% in December. We expect consumer inflation to end 2021 at 10.5%.

Key points

• Key points:
• Despite the lower than its seasonal avg. food inflation, the upward revision of food weight in the basket led +0.6pp contr. to the headline. Annual food inflation still decelerated to 18.4% from 21.2% on base effect.
• The adjustment in administrative prices and rapid increase in oil prices resulted in annual energy inflation( 3.2% mom) to rise 7.9%.
• Cost push factors are strengthening as domestic producer price inflation(2.66% mom) resulted in an annual inflation of 26.16%.
• On the core inflation front, unfavorable seasonal effect, sticky services prices increasing in all sub-indices and still strong domestic demand led core inflation to upsurge to 15.5%
• The trend consumer inflation level (near 14%) will require the maintenance of the decisive tight monetary stance for a long period of time as the Central Bank (CBRT) already highlighted.

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