Headline inflation latest publications
Consumer prices increased by 1.13% in June, remaining significantly above both the consensus and our expectation (0.6% vs. 0.45%). Thus, also led by the negative base effects, annual inflation accelerated to 12.62% from 11.39% in May.
Consumer prices increased by 0.74% in December, beating the consensus estimate of 0.4%; led the annual CPI to end 2019 at 11.84%. In absence of shocks, Consumer inflation could stay between 11-12% in 1Q20 before experiencing levels close to 10.5% in 2Q20. We expect inflation to be 8.5% at the end of 2020.
The Central Bank of Turkey (CBRT) reduced the policy rate by 425 bps from 24% to 19.75%. The movement was bolder than expected by market expectation and ours (Consensus 250 bps, BBVA 200 bps). Some risks remains on both economic and geopolitical sides which should be met with a gradual and cautious policy.
As expected, the CBRT maintained its policy rate unchanged. Important uncertainties on politics and geopolitics remain to be solved, so today’s decision is a prudent one. We maintain our view that the CBRT will start the gradual easing cycle towards the end of the year, but the expected disinflation could bring it forward.
Inflation grew in February, but the general part intensified its fall as a consequence of the lower food and energy prices. Looking forward, we expect the positive trend to continue in the core component, but the downwards pressure in the prices of raw materials promises new falls in headline prices.