Turkey | Upside surprise in June CPI

Summary

Consumer prices increased by 1.94% in June, remarkably higher than expectations on the back of reopening, resulting in an annual inflation of 17.53% (up from 16.59% the month before). We expect consumer inflation to hover around 18.5% till November and end the year at near 16% with base effects.

Key points

• Key points:
• Core inflation reflected the continuing exchange rate pass-thru impact and strengthening supply-side factors after the reopening in the economy with 2.5% mom on the back of basic goods and services prices inflation.
• Cost push factors deepened as domestic produces prices surprised on the upside with 4% mom inflation, implying annual inflation of 42.9%.
• High inertia persists as annual services inflation is at 13.5% with the reopening of the economy.
• Still strong domestic demand, higher commodity prices, lag impact of exchange rate pass thru, deteriorated inflation expectations and other supply-side problems, risks remain tilted to the upside.
• Given the upside risks we expect consumer inflation to hover around 18.5% till November and end the year at near 16% with the help of positive base effects.

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