Turkey: CPI inflation expected to accelerate to 16.3% Y/Y - TDS

Analysts at TD Securities suggest that Turkey’s July CPI inflation is expected to accelerate to 16.3% Y/Y from a prior 15.4% mostly on the back of an increase in the food price sub-components and pass through from the weak lira.

Key Quotes

“Given the increase in inflation and the near 7% depreciation of TRY vs the USD and EUR basket (50% weight for each) over the month of July, inflation will most likely be on the rise both in the July data and the following months. Given continued TRY depreciation in August, further tightening seems almost unavoidable now.”

“While we expect the MPC to hike 100bps again at its next meeting on September 13, brisk and uncontrolled lira depreciation may trigger emergency hikes at an earlier stage, potentially even this week or next. Core CPI inflation will also be looked at for a less volatile measure of future inflation - core is expected to increase to 15% Y/Y from a prior 14.6%.”