Turkey | CPI started the year at 12.15%

Summary

Consumer prices increased by 1.35% (1.0% market vs. 1.5% BBVA Research) in January, leading the annual figure to rise to 12.15% up from 11.84% in December. We expect consumer inflation to be 8.5% at the end of 2020 under the assumptions of a neutral real exchange rate and a food inflation at historically seasonal averages.

Key points

• Key points:
• Headline inflation accelerated, which was mainly pushed by the unfavorable base effects on energy prices.
• Core prices continued to preserve the signals of the slow but ongoing recovery in domestic demand.
• Food inflation, which remained seasonally high compared to the recent years but lower than what we have expected.
• Volatile market sentiment led by both local and external factors, stickiness on inertia and inflation expectations and rapid recovery in domestic demand prove to be the main challenges over pricing behavior.
• In absence of shocks, we still expect inflation to experience one-digit levels in the second half of the year, which should be accompanied by prudent monetary and fiscal policies.

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