Turkey | Annual CPI realized at 10.9% in April

Summary

Consumer prices increased by 0.85% in April, higher than both the consensus and our expectation (0.6%). Though, annual inflation continued to decelerate to 10.94% from 11.86% in March on top of favorable base effects led by energy prices. We expect consumer inflation to be 7.5% at the end of 2020.

Key points

• Key points:
• Food prices, which surprised us on the upside, increased by 2.5% mom mainly on the back of unprocessed food inflation (3.6%). Therefore, annual food inflation increased to 10.9% from 9.7% in March.
• Core prices increased only by 1% mom, causing annual core inflation to decelerate further to 9.9%, backed by poor demand and lower seasonal effects in the new methodology by offsetting the impact of the recent depreciation in the exchange rate.
• The suppressed energy prices continue to weigh on the downside as expected where energy prices decreased by 5% mom led by the historically low oil prices, resulted in a sharp decline in annual energy inflation to 3.3% from 9.8%.
• Assuming a partial normalization in both activity and market conditions in the second half of the year, we expect inflation to realize 7.5% at the end of 2020, which would still imply the continuation of the measured rate cuts of the CBRT in the next few meetings.

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