Turkey’s inflation rate shoots past 60%

With strong and broad-based price pressures, March CPI inflation turned out to be another high figure at 5.5%, close to the market consensus of 5.7% (vs our call at 5%). Annual CPI inflation maintained its rapid uptrend, which has gone on since last October, reaching reached 61.1%, reflecting the impact of worsening inflation expectations, pass-through from currency weakness attributable to deep monetary easing delivered by the CBT, along with large administrative price hikes and pressures on global commodity prices.

For the core indicators, both B (excluding unprocessed food, energy, alcoholic beverages, tobacco and gold) and C (excluding energy, food and non-alcoholic beverages, alcoholic beverages, tobacco and gold) indices moved up further to 51.3% YoY and 48.4% YoY, respectively, standing at the record-high levels in the current inflation series. While the underlying trend for both indicators shows a retreat in March, it remains highly elevated, confirming a need for policy reversal towards a more restrictive stance.

On the PPI side, the annual change stood at 115%. That shows the strength of cost-led inflationary pressures which could further weigh on the CPI outlook in the coming months.

In the breakdown of the CPI, goods inflation exceeded 70% given the spike in energy inflation, continuing upside pressures on food and core goods (except clothing). Particularly energy inflation is now at triple digits reflecting the impact of exchange rate developments and higher energy prices along with pricing pressures on other imported commodities. Accordingly, transportation turned out to be one of the major contributors to the headline in March given adjustments in gasoline and LPG prices while we also see hikes in automobile prices. Food, on the other hand, was the key contributor with annual inflation in this group now at 70.3%. As for services, annual inflation is at the highest in the current 2003=100 series with 36.7% on the back of catering and transportation services.