Turkey | Inflation materialized as expected

Summary

Consumer prices increased by 2.0% mom in October, in line with median market expectation but slightly higher than ours (2.0%, Bloomberg vs 1.8%, BBVA). Annual inflation decreased further to 8.55% from 9.3% in September on the back of strong favorable base effect . We expect year end annual inflation to materialize as 11.8%.

Key points

• Key points:
• Inflation continued to decrease and stayed at one digit level thanks to favorable base effect.
• Core inflation supported the disinflation path on diminishing pass-thru and weak demand pressures.
• We expect year end annual inflation to materialize as 11.8% and could remain around 12% in the first half of 2020 in the absence of no further shock.
• Unanchored medium run inflation expectation, high trend inflation, geopolitical and global uncertainties pose some risks on inflation outlook.
• We believe that CBRT should remain on prudent side as maintaining a reasonable real interest rate.

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