Turkey | Inflation surprised on the downside

Summary

Consumer prices increased by 0.38% mom in November, way lower than market consensus and ours (0.75%, Bloomberg vs 0.77%, BBVA). Annual inflation increased to 10.56% from 8.55% in October due to the unfavorable base effect. We expect that annual inflation will increase close to 11.8% at the end of 2019 with downside risk.

Key points

• Key points:
• Inflation outlook has been supported by low food prices on better than seasonal climate condition, weak demand pressures, lower pass-thru and the ease in cost push factors.
• We think that annual consumer inflation will fluctuate between 11%-12% in the first half of 2020 assuming no further shock.
• Geopolitical, global and local factors continued to pose some upside risks on inflation outlook of CBRT on top of unanchored medium run inflation expectation and high inertia.
• The CBRT should remain on the prudent side in order to buffer some risks.

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