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bne October 2021
Turkey's Official Annual CPI vs. PPI Inflation
goods, at least not for anyone who goes through the sobering experience of entering a Turkish supermarket.
Vehicle prices recently declined after a tax cut but they have doubled since last year. BloombergHT reported the TUIK’s official passenger car price declined by 3.4% m/m in August. It did not draw attention to the annual price change, but
its chart showed that the TUIK price rose to TRY293,000 in August from about TRY150,000 a year ago.
The reality, you will gather, is far ruder than the official picture, but nevertheless we must return our focus to the policy rate, with the next rate-setting meeting scheduled for September 23.
Of late, the market has, interestingly, been going easy on Ankara’s monetary policy. It took a dose of Erdogan’s guidance to produce the consensus expectation for official August inflation of 18.75%, rather than weighing up basic logic and doing some elementary mathematics. But the TUIK’s released figure of 19.25% (the highest official inflation reading since April 2019) has thrown the market a curveball and the prevailing anticipation is that the September 23 central bank policy meeting will hold rates, even though official inflation is now above the policy rate.
Turkey’s lira, meanwhile, so often in the news for smashing through unfavourable records, remains on good behaviour,
Opinion 77 leaving scope for a story that could suggest a limited decline
in official inflation in November and December.
November is indeed a critical juncture as the lira could get into some difficulties prior to the new year market rally that should begin in December.
On December 3, the official inflation data for November will be released.
The next inflation release is scheduled for October 4, when the official movement in September’s prices will be relayed.
As things stand, guidance put out by Haluk Burumcekci of Burumcekci Consulting still holds. On August 3, Burumcekci said: “Even without a loss in lira value [from the 8.25-8.65 band seen in the USD/TRY pair since July], inflation may rise to 19-20% in the next three months [August, September, October], with a fall coming only in the final two months [November, December] to end the year at 17-18% at best. If the value-added tax discount due to end in September was not extended, this could exert an upward impact of around 1 percentage point.”
Burumcekci anticipated that the policy rate will end the year at 19% although the market remains positive for limited 50bp cuts from the last two monetary policy meetings, set for November 18 and December 16.
To reiterate, the next stop for revising where we’re at comes with the September 23 rate-setting meeting, with the September inflation release due out on October 4.
On July 29, the central bank raised its end-2021 inflation forecast to 14.1% from the 12.2% it envisaged in April, while the upper limit on inflation was moved up from 14.4% to 16%, closer to the market’s assessment.
On October 28, the central bank will release its latest quarterly inflation report and updated inflation forecast.
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