Published on Monday, April 3, 2023 | Updated on Tuesday, April 4, 2023

Türkiye | Downside surprise in March CPI

Consumer prices rose by 2.3% in March, lower than our expectations (2.5%) and consensus (2.8%) while annual inflation neared 50.5%. We maintain our year end inflation forecast of 45% but acknowledge upside risks due to OPEC+ oil production cut, potential minimum wage hike in July, ongoing high inertia and robust demand.

Key points

  • Key points:
  • Annual core (C index, 2.15% mom) inflation declined to 47.4% in March from 50.6% while inertia remained strong as annual services inflation (3.1% mom) hovered around 60%.
  • Despite the rapid increase in other unprocessed food inflation (11.3 m/m), food prices geared down to 3.9% m/m (7.6% m/m prev.) which resulted in an annual figure slightly coming down to 67.1%.
  • The recent price reductions in electricity for all economic agents and in natural gas for industry might have a total negative impact of 1.4pp on CPI.
  • Deterioration in macroeconomic conditions especially inflation expectations, ongoing currency shocks and loose economic policies seemed to underpin a common movement in subsectors inflation.
  • Despite our expectation of a gradual policy normalization after the elections, the recent high inflation trend, still strong cost push factors and uncertainty on food inflation put upside risk on inflation outlook.

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