Türkiye | April CPI not to allow complacency

Summary

Consumer prices rose by 3.0% m/m, in line with our expectations but slightly lower than the consensus (3.2%), resulting in an annual inflation of 37.9%. We maintain our 2025 year-end inflation forecast of 31%, which we had lowered from the previous 32% amid the recent decline in oil prices.

Key points

• Key points:
• We calculate only a limited deterioration in seasonally adjusted monthly inflation to 2.7% (down from 2.6% in March), leading to a slowdown in its 3-month average trend to 2.5% in April (vs. 2.8% prev.).
• Yet, given the distribution skewed to the right-hand side with a higher weight of price increases above the median, the underlying monthly inflation trend as an average of six indices, followed by the CBRT, increased to 2.7% m/m (1.9% prev.)
• The seasonally adjusted core B and core C monthly inflation rose to 2.8% and 3%, respectively (vs. 1.9% and 2.2% in Mar); however their 3-month trend came down below 2.5% (back to Dec levels), confirming more limited pass-through on prices from the most recent shocks than previous periods. We calculate an acceleration in monthly basic goods inflation due to the lagged impact of the currency depreciation and services inflation remained almost flat across the board.
• Assuming no additional minimum wage hike for 2H25, tighter monetary stance accompanied by a less tight fiscal policy resulting in a GDP growth of 3.5%, and our expectation of $68.0 on average per barrel (vs. the previous $74) and 25% natural gas price hike for households later, we forecast 31% year end inflation for 2025.
• We will closely monitor the next inflation report presentation of the CBRT to be made on May 22nd, where their output gap projections and communication will be crucial to gauge their future monetary stance. The CBRT now prioritizes to support its reserves by even a tighter stance, led by the most recent macro prudential measures announced at the weekend. Once the CBRT feels more comfortable about the level of reserves, they can again start easing the monetary stance at some point, also helped by the upcoming tourism season.

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