Turkey: Uncertainty on inflation outlook has increased further – BBVA

Inflation in Turkey reached 17.1% (annual) in April. The Research Department at BBVA holds a year-end inflation forecast at 15% and they expect the Central Bank of the Republic of Turkey to start an easing cycle only very gradually in September.

Key Quotes: 

“Core C prices annual inflation continued to increase (17.8% yoy, the highest level since April 2019) where recent depreciation in currency and accelerating cost push factors seem to have weaker impact so far.”

“Deepening cost push factors, potentially delayed exchange rate pass-thru impact and uncertainties in price adjustments once the economy is reopened (sticky services prices due to low capacity rules) might still result in a worsening inflation outlook.”

“If the potential impact of the reopening in the economy is also considered, we believe the uncertainty on inflation outlook has increased further, given the delayed demand and cumulated supply-side factors.”