Turkey | CPI above 54% and still climbing

Summary

Consumer prices increased by 4.8% in February and resulted in an annual inflation of 54.4%, (prev: 48.7%). Given the deepening cost push factors, uncertainty on commodity prices and inertia, CPI would surpass 60% in 2Q and 3Q, before falling down to a level at least above 40% on positive base effects in December.

Key points

• Key points:
• Food prices recorded a new peak of monthly inflation once again and annual food inflation climbed up to 64.5%, where fruit and vegetables reached annually 80.8%.
• Energy prices continued to rise where we would expect further deterioration given the negative outlook in natural gas and oil prices following the Russia’s invasion to Ukraine.
• Core prices inflation slowed-down relatively (3.75% m/m) but remained elevated given the high second round effects, worsened expectations and still continuing solid consumption.
• Cost push factors kept deepening as domestic producer prices continued to accelerate (7.2% m/m, 105% y/y) which will likely continue given the bias on commodity prices due to the war in Ukraine.
• The uncertainty on second round effects and inertia fueled by accelerating cost push factors and worsening inflation expectations will keep upside risks on inflation outlook for a longer period of time.

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