Turkey: Inflation again surprised on the downside

Summary

Consumer prices increased by 0.99% mom in September lower than the median consensus (1.38%, Bloomberg and BBVA Research). Hence, annual inflation decreased to one digit level of 9.3% from 15% in August, the lowest level since January 2017. We expect annual inflation to get closer to 12.5% at the end of the year.

Key points

• Key points:
• Annual inflation decreased to one digit level on the back of strong favorable base effect, ongoing normalization in food prices and easing in core prices.
• Current low inflation dynamics and expected base effect could highly likely led annual inflation to decline below 9% in October.
• The positive disinflation momentum, weak pass-thru and still low demand pressures could compensate somewhat the expected unfavorable base effect from November onwards.
• While the rapid disinflation provide some comfort for rate cuts, the still two digit inflation expectations and uncertainties stemmed from global and local factors require the Central Bank a more gradual adjustment .

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