Turkey: November CPI paints a problematic picture – ING
7 December 2015, 07:12
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Muhammet Mercan, Chief Economist at ING, notes that the Turkish CPI
increased by 0.67% MoM in November, higher than the consensus at 0.46%,
pulling annual inflation up markedly to 8.10% from 7.58%.
Key Quotes
“Negative base effects also contributed to the higher inflation. Despite the inflation outlook remaining challenging, the CBT’s main focus will be any action related to Fed normalisation.”
“Overall, despite supportive energy prices, pressure on the inflation outlook continues as evidenced by rents, which is a good proxy of services inflation and reached the highest level on an annual basis since Aug-09. Goods inflation, however, is still impacted by cumulative TRY depreciation. Going forward, movements in the currency market should determine the annual inflation trajectory along with commodity prices. It should be noted that Russian sanctions on Turkish agricultural products might ease fruit, vegetable and poultry prices as indicated by some anecdotal evidence.”
“However, the impact might be more visible on wholesale prices while how prices for end consumers will move is not yet clear. Additionally, headline inflation may still be under pressure going forward with the planned 30% hike in the minimum wage. In this environment, the CBT maintains tight liquidity policy, and keeps short-term rates elevated. Any action related to Fed normalisation will determine the CBT’s behaviour in the coming period.”
Key Quotes
“Negative base effects also contributed to the higher inflation. Despite the inflation outlook remaining challenging, the CBT’s main focus will be any action related to Fed normalisation.”
“Overall, despite supportive energy prices, pressure on the inflation outlook continues as evidenced by rents, which is a good proxy of services inflation and reached the highest level on an annual basis since Aug-09. Goods inflation, however, is still impacted by cumulative TRY depreciation. Going forward, movements in the currency market should determine the annual inflation trajectory along with commodity prices. It should be noted that Russian sanctions on Turkish agricultural products might ease fruit, vegetable and poultry prices as indicated by some anecdotal evidence.”
“However, the impact might be more visible on wholesale prices while how prices for end consumers will move is not yet clear. Additionally, headline inflation may still be under pressure going forward with the planned 30% hike in the minimum wage. In this environment, the CBT maintains tight liquidity policy, and keeps short-term rates elevated. Any action related to Fed normalisation will determine the CBT’s behaviour in the coming period.”
