Data released on Tuesday showed inflation rose by 1.8% in July in Turkey, a reading above expectations. Analysts at BBVA point out the upside surprise in food prices boosted the annual inflation rate to 18.95% from 17.53%. They expect consumer inflation to remain around 18.5/19% till November, ending the year around 16% helped by base effects.
Key Quotes:
“Consumer prices increased by 1.80% in July, again being realized above expectations (BBVA Research 1.67%, Consensus 1.57%). Annual consumer inflation rose to 18.95% up from 17.53% in June. Higher than expected positive food inflation in contrast to its seasonally negative level and a mixed picture in core prices resulted in our deviation.”
“Potential volatility in food inflation due to this year’s drought besides losses on still continuing fires, and deepened cost-push factors will keep the risks on the upside for inflation outlook in the near term. Even in a gradual currency depreciation pattern, we expect consumer inflation to stay close to 18.5-19% till November and end the year at 16% with the help of positive base effects on food inflation in the last two months of the year.”
“Cost push factors on strong commodity prices and supply side problems, pressures from the exchange rate pass thru, still growing domestic demand and worsening inflation expectations maintain uncertainties over the inflation outlook. We expect consumer inflation to realize 16% at the end of the year, which could provide only very limited room for an easing from the CBRT starting from October as the CBRT communication also highlights.”