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TURKEY: Inflation Drops Below 40% Y/Y, Clearing Path for Another 250bp Rate Cut

TURKEY
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  • Turkey’s annual inflation rate slowed to 39.1% in February from 42.1% the prior month, according to TurkStat, below the analyst survey forecast of 39.9%. Monthly inflation stood at 2.27%, slowing from 5% in January and showing below expectations of 2.9%. Core prices rose 39.05% on an annual basis, up 1.8% M/M.
  • On a month-on-month basis, the “Health” component of the CPI basket dropped 4.38%, with the partial reversal of regulated health price hikes likely accounting for much of the improvement. Indeed, Bloomberg Economics estimate that about 1ppt of the fall in month-on-month inflation is due to the adjustment to some government administered healthcare prices.
  • Overall, the downside surprise will likely facilitate another 250bp rate cut when the CBRT meet on Thursday, where policymakers may also deliver easing through the implementation of additional macroprudential measures. The lira briefly reversed losses on the back of the data, with USD/TRY close to flat at typing after rising as much as 0.15% at the start of the session. Meanwhile, the banking equity index trades over 4% higher.
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  • Turkey’s annual inflation rate slowed to 39.1% in February from 42.1% the prior month, according to TurkStat, below the analyst survey forecast of 39.9%. Monthly inflation stood at 2.27%, slowing from 5% in January and showing below expectations of 2.9%. Core prices rose 39.05% on an annual basis, up 1.8% M/M.
  • On a month-on-month basis, the “Health” component of the CPI basket dropped 4.38%, with the partial reversal of regulated health price hikes likely accounting for much of the improvement. Indeed, Bloomberg Economics estimate that about 1ppt of the fall in month-on-month inflation is due to the adjustment to some government administered healthcare prices.
  • Overall, the downside surprise will likely facilitate another 250bp rate cut when the CBRT meet on Thursday, where policymakers may also deliver easing through the implementation of additional macroprudential measures. The lira briefly reversed losses on the back of the data, with USD/TRY close to flat at typing after rising as much as 0.15% at the start of the session. Meanwhile, the banking equity index trades over 4% higher.