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CPI Expected to Cool to 55.70% y/y on Base Effects (0700 GMT/1000 TRT)

TURKEY
  • CPI data is on the docket later this morning (0700 GMT/1000 TRT), with inflation expected to cool slightly on base effects. President Erdogan is likely to use the mechanical decline in inflation to claim victory over financial instability ahead of the elections.
    • Exp. 55.70% y/y (Prior: 57.68% y/y)
    • Exp. 3.49% m/m (Prior: 6.65% m/m)
  • Due to the impact of the earthquakes, Goldman expect the pace of disinflation to slow down as underlying price pressures are likely to have worsened. They expect headline inflation to decline to 55.9% y/y on base effects. The disaster’s inflationary impact will likely come from potential supply chain problems, higher prices for construction materials and rising food and rent inflation.
  • Similarly, while UniCredit expect disinflation to continue due to base effects, they acknowledge that supply shocks from the earthquake may create inflationary pressure, primarily due to an increase in food prices. They expect consumer prices to increase by 3.9% m/m in February, bringing annual inflation to 56.2%. UniCredit’s observations for a selection of food items hint at a 6% monthly rise in food prices which would push inflation in this category to 67.2% y/y.
  • ING say given deeply negative real rates, risks to the outlook this year are on the upside with a potential policy mix of larger fiscal stimulus and looser monetary policy following the earthquakes. They expect inflation to be 1.7% m/m, leading to a further decline in the annual figure to 53%.
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