TRY: Bad news that inflation expectations are still jittery – Commerzbank

Market commentators’ forecast for inflation as of end-2024 did not accelerate by all measures, but did so by some measures – in other words, they have turned jittery all over again, as opposed to steadily declining in response to latest (favourable) inflation data, Commerzbank's FX Analyst Tatha Ghose notes.

Political situation emerges as a lira negative factor

“These inflation expectations have remained consistently higher than official forecasts (e.g. those found in CBT’s Inflation Report). Why this is becoming concerning is that the commonly observed year-on-year inflation rate has sharply declined in the past two readings.”

“Historically, expectations behaved mostly in an adaptive manner, hence it is somewhat intriguing that there was no improvement in response – which means that the broader market sees through the superficial inflation improvement achieved so far and, rightly, worries about the underlying trend.”

“At a time when more decisive inflation targeting is warranted, the political situation is turning adverse for this very initiative. And, this now emerges as a further lira negative factor.”