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TURKEY: Slowing Core CPI Tips Real Rates Positive for First Time in Three Years

TURKEY
EM BulletBulletGlobalEmerging Market NewsRegion
  • This morning's inflation print came in higher-than-expected, however still confirmed the gradual pace of disinflation, as flagged by Simsek this morning: "disinflation process to continue in the coming months, slowdown in economic growth in temporary".
  • What is notable about this morning's release is that core CPI Y/Y - the de facto CBRT policy target - has dipped below 50%, meaning Turkey now has positive real interest rates for the first time since 2021 (see chart below).
  • The slowdown in headline inflation was driven largely by the housing water/electricity category (3.86% from 8.51%), however this pressure was countered by an uptick for food prices (2.48% from -1.10%) and clothing and footwear (3.63% from 0.35%).
  • Simsek's comments also touched on the FX-protected deposits accounts scheme, as he confirmed his government is "determined" to exit the arrangements.
  • Evidence is mounting of the economic impact in Turkey of the Middle-east geopolitical tensions, with Ekonomi reporting that exporters are putting cargos on hold for shipments to conflict zones.
  • The CBRT governor is set to speak in parliament at 2.30pm local time (1230BST), while the President chairs a meeting of the National Security Council.
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  • This morning's inflation print came in higher-than-expected, however still confirmed the gradual pace of disinflation, as flagged by Simsek this morning: "disinflation process to continue in the coming months, slowdown in economic growth in temporary".
  • What is notable about this morning's release is that core CPI Y/Y - the de facto CBRT policy target - has dipped below 50%, meaning Turkey now has positive real interest rates for the first time since 2021 (see chart below).
  • The slowdown in headline inflation was driven largely by the housing water/electricity category (3.86% from 8.51%), however this pressure was countered by an uptick for food prices (2.48% from -1.10%) and clothing and footwear (3.63% from 0.35%).
  • Simsek's comments also touched on the FX-protected deposits accounts scheme, as he confirmed his government is "determined" to exit the arrangements.
  • Evidence is mounting of the economic impact in Turkey of the Middle-east geopolitical tensions, with Ekonomi reporting that exporters are putting cargos on hold for shipments to conflict zones.
  • The CBRT governor is set to speak in parliament at 2.30pm local time (1230BST), while the President chairs a meeting of the National Security Council.