TRY: Istanbul CPI suggests moderation ahead of national inflation data – Commerzbank

Istanbul’s November CPI fell to 38.3% y/y from 40.8% in October, signaling potential moderation in today’s national CPI figures, with consensus forecasts pointing to a decline in Turkey’s headline inflation from 32.9% to 31.7% y/y. 1. Despite expectations of cooling inflation, the Turkish lira remains under pressure, with further weakness toward 43.00 against the dollar likely if month-on-month inflation shows only modest deceleration, Commerzbank's FX analyst Tatha Ghose notes.

November inflation expected to cool slightly in Turkey

"Istanbul CPI data for November indicates a potential moderation in today’s national CPI figures. The Istanbul Chamber of Commerce (ITO) reported a decrease in thy cost of living index to 38.3%y/y in November from 40.8%y/y in October. This has led to optimism regarding Turkstat's CPI release this morning: the analyst consensus now expect moderation in year-on-year inflation from 32.9%y/y to 31.7%y/y for headline and from 32.1%y/y to 31.5%y/y for core CPI."

"So far, our preferred measure of underlying momentum – the seasonally-adjusted month-on-month rates of price change – had not moderated convincingly: the core index was up 2.1%m/m in October. But, the consensus forecasts for November translate to 1.6%m/m and 1.9%m/m for headline and core which, if proven correct, would indeed represent the first instance of cooling of underlying inflation in about two quarters."

"Last month too, year-on-year inflation had superficially moderated, but this was not enough to positively impact the lira, which weakened past 42.00 against the dollar during the month. Hence, it will be crucial to observe to what extent the month-on-month inflation rate will decelerate today. Concerns persist regarding sustainable inflation moderation, despite assurances from policymakers. Given these factors, and considering that inflation expectations have also accelerated recently, the lira is likely to weaken further, moving towards 43.00 over the coming month."