Türkiye | Lower than expected February CPI

Consumer prices rose by 3.15% in January, lower than both our expectations (4.2%) and market consensus (3.5%) and annual inflation continued to come down to 55.2% (57.7% in Jan.). Following our revisions after the quakes, we revised our year-end inflation forecasts to 45% and 24% for 2023 and 2024, respectively.

Key points

• Key points:
• Core prices (C index) inflation retreated significantly to 2.1% m/m (50.6% y/y) from 7.7% m/m in January, mainly helped by a weaker increase in basic good prices (1.2% m/m).
• Services inflation remained strong with an increase of 3.1% m/m (61.6% y/y), following a sharp monthly rise (12.7% m/m) in January, which signals further strengthening in inflation inertia.
• Food inflation remained significantly higher than its seasonal average (7.6% m/m vs. 2.4% m/m in the current 2003 series), while recording annual inflation of 68.6%.
• Our trend estimations in services and food prices indicate stickiness while solid cost push factors, ongoing robust demand and possible negative impact of a drought and recent quakes on food prices add more challenges.
• Based on our expectations of a gradual depreciation path in currency, consumer inflation will likely remain above 45% y/y till the elections in May and the inflation outlook thereafter will depend on the adjustment in economic policies and the exchange rate.

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