TRY: Fragile as oil shock worsens outlook – Commerzbank
|Commerzbank’s Tatha Ghose argues that Turkey’s brief disinflation respite is already obsolete as higher Oil prices and external shocks dominate. Headline CPI slowed in March, but core dynamics remain strong and credibility concerns persist. Rising energy costs, a widening trade deficit, capital outflows and heavy intervention leave the Turkish Lira increasingly vulnerable to a disorderly adjustment if the regional war does not de-escalate soon.
Disinflation story eclipsed by energy shock
"Turkey’s March CPI print offered a brief moment of relief last Friday, with headline inflation slowing to 30.9%y/y and 1.9%m/m – below most estimates. Yet this downside surprise already looks outdated."
"Last and most crucial point: the renewed rise in energy cost points to a reversal ahead – hence, the backward-looking March data are beside the point."
"The shift in outlook because of the oil price is not hypothetical: policymakers have been explicit that the oil price shock will feed through materially, with FinMin Mehmet Simsek estimating a 3.6-4.4pps impact on inflation if oil were to stabilise at around US$85/bbl (we think that it will)."
"The current account situation was worsening since late last year as interest rates were being cut – now the outlook has turned firmly negative."
"We think, however, that lira management is increasingly fragile (resulting in noticeable drawdown of resources). If the war were not to de-escalate soon, the probability of a disorderly adjustment would rise materially."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.