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Turkey Inflation February 2020

Turkey: Price pressures build further in February

Consumer prices in Turkey rose 0.91% month-on-month in February, which is down notably from January’s 1.68%. The softer print partly reflected a softer rise in core consumer prices, while prices dropped for clothing and footwear, and recreation and culture. On the other hand, marked rises in health; food and non-alcoholic beverages; and hotel, cafes and restaurant prices provided upward pressure.

Inflation, meanwhile, rose to a 19-month high of 15.6% in February (January: 15.0%), while the trend pointed up with annual average inflation rising to 12.8% in February (January: 12.5%). Lastly, core inflation jumped to a 22-month high of 16.2% in February from 15.5% in January.

Commenting on the data, Muhammet Mercan, chief Turkey economist at ING, stated: “The latest data (…) confirms that the inflation dynamics affected by demand conditions, elevated services inflation, the recent uptrend in commodity prices and supply constraints during the pandemic, remain challenging.“

Looking ahead, Mercan added: “Inflation will likely peak in April though upside risks continue given the likely recovery in demand conditions in certain groups, the impact of rising international commodity prices, the possibility of tax adjustments and still high inflation expectations. Given this backdrop, the CBT will remain cautious in the near term given not only inflationary pressures, but also concern about the level and composition of reserves, high dollarisation and the need to maintain capital flows.”

Maya Senussi, senior economist at Oxford Economics, added:

“We believe inflation will remain elevated, peaking in April and staying in double digits into 2022. (…). High inflation will persist over the forecast period, particularly due to elevated food prices, sticky inflation expectations, and bottlenecks in the economy. “

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