Inflation Surprised on the Downside

Consumer prices rose 0.01% MoM in November, notably lower than the market consensus of 0.48%. Meanwhile annual inflation rose to rose 7.3%  This is the lowest level of 12-month Consumer Price Index since May 2013. However, current year-to-date inflation is 6.9% which is 10 bps higher than CBT’s year-end target. One again CBT misses the inflation target.

Despite the lower than expected inflation numbers, CBT will keep on being cautious, no change in monetary policy is expected. Average cost of funding will be hanging between 6.5%-6.8% in the short-run but in the long-run more tightening is expected.

On the other hand, it is officially announced that gas prices will hike, and is expected to contribute to CPI by 0.3%. All the developments signal that year-end CPI will reach at 7.5%

After the release of official CPI data, Turkish lira gained just until all European markets turn cautious on Fed stimulus following the good US data. US Dollar hit 2.05 per Lira this morning.

Turkey - CPI vs PPI yoy

Turkey - CPI Contibutors

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