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Turkey Inflation February 2020

Turkey: Inflation rises further in February

Turkish consumer prices rose 0.35% month-on-month in February, down from January’s 1.35% increase and below market expectations of a 0.65% rise in prices. Moreover, the print marked an eight-month low as transportation; alcoholic beverages; and clothing and footwear became cheaper while food and non-alcoholic beverages and housing and utilities inflation eased.

Inflation rose for the fourth consecutive month, from 12.2% in January to 12.4% in February, amid continued currency depreciation and lingering geopolitical tensions. Annual average inflation, however, eased to 13.9% from 14.5% in January. Lastly, core inflation rose to 10.0% in February from 9.9% in the prior month.

Looking ahead, inflation is expected to stay in double-digit territory this year due to lingering lira weakness amid the government’s renewed focus on achieving high economic growth with cheap credit and looser monetary policy. However, the monetary-policy easing cycle could be paused in the months ahead as real interest rates moved further below zero. On the other hand, the Central Bank could continue to cut rates due to its year-end inflation expectation of 8.2%.

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