Turkey’s official consumer price inflation dipped to 38.10% y/y in March from 39.05% a month earlier, the country’s statistical institute TUIK said on April 3.
The softer-than-expected Turkish inflation figure for March suggests that the sell-off in the lira last month hasn’t exerted significant upwards pressure on consumer prices, William Jackson of Capital Economics said on the reading.
The outturn was below both Capital Economics’ and the consensus expectations that stood at 38.8% y/y and 38.9% y/y respectively.
In m/m terms, prices rose by 2.5% in March versus a consensus of 3.0%.
Only partially captures
These CPI figures will only partially capture the effects of the sell-off in the lira, which began in the middle of the month, but so far they suggest there’s been little inflationary impact, according to Jackson.
While food prices rose sharply by 4.9% m/m, inflation was soft in most categories that are more likely to be affected by the exchange rate.
Clothing prices fell 2.5% m/m while transport prices rose by just 0.25%. Core inflation rose by 1.5% m/m. It was one of the weakest rates posted since 2021.
Capital Economics will get a better sense of the inflationary impact of recent market pressure in Turkey in the April CPI figures due May 5.
Provides relief
As things stand, the central bank will probably be inclined to leave interest rates unchanged at its meeting later this month, rather than following up the interim rate hike in March with further tightening, according to Jackson.
The March release will provide welcome relief for Turkey’s central bank ahead of its next meeting on April 17.
The central bank provided hawkish language when raising interest rates last month, indicating a readiness to tighten policy further.
However, the March figures probably suggest that interest rates will be left unchanged, rather than raised further, Jackson also noted.