Search ForexCrunch

According to the Research Department at BBVA, a further adjustment in monetary policy in Turkey should not be ruled out after today’s surprise in inflation data.  

Key Quotes:  

“Consumer prices increased 6.3% (mom) in September, significantly higher than our and market expectations (3.9% BBVA Research vs. 3.4% Bloomberg). This leads the annual figure to jump to 24.5% from 17.9% in August. The upside surprise was somehow broad-based on top of strengthening exchange rate pass-thru and increasing cost pressures, which resulted in an acceleration of core inflation to 24.1% from 17.2%.”

“The highest contribution to today’s upside surprise stemmed from core inflation, where transportation, furniture, housing equipment and services prices took the lead. Food inflation was extraordinarily high with 6.5% mom, the highest September figure in the 2003 series. Probably due to supply side problems and currency impact on processed food, annual food inflation jumped to 28.6% from 20.3%.”

“Given October’s utility price hikes and lagged effects of currency depreciation, upward pressures on energy inflation and producer prices will continue in the short term.”

“Today’s inflation data shows that pricing behavior is adjusting faster than expected and this could be considered as a “factor affecting inflation requiring further monetary policy tightening”. In our opinion, a new hike should not be ruled out in the CBRT’s next meeting in October 25.”