Turkey: Consumer inflation likely to stay close to 19% till November – BBVA

Recent data showed inflation in Turkey rose up to 19.25% in August. According to the Research Department at BBVA, consumer inflation will remain near 19% till November, leaving almost no room for an easing form the Central Bank of the Republic of Turkey (CBRT). 

Key Quotes: 

“Consumer prices increased by 1.12% in August, again being realized above expectations (BBVA Research 0.9%, Consensus 0.7%) on the back of a higher than expected food inflation. Thus, annual consumer inflation rose to 19.25% up from 18.95% the month before. Core inflation continued to weaken and declined to 16.76%, helped by the recent changes in the special consumption tax ranges in personal cars.”

“Although recent stable levels of the exchange rate provide some relief, cost push factors remain on track due to strong commodity prices and supply side problems. Also, still growing domestic demand and worsening inflation expectations facilitate pass-thru over the consumer prices, keeping the risks on the upside for inflation. We expect consumer inflation to stay close to 19% till November and then decline to near 17% at the end of the year, which leaves almost no room for an easing from the CBRT. But, given the recent CBRT communication, we still expect rate cuts in November and December, ending up with a policy rate of 18% at the end of the year.”