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.”
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