Commerzbank’s Tatha Ghose argues that Turkey’s upcoming CPI data is largely old-fashioned given the looming impact of higher energy prices. He expects a forceful March monthly print, but emphasizes that inflation caused by an external shock may be treated by currency markets as transient. Regardless, he maintains that the lira is likely to continue on a steady structural path of depreciation, with geopolitical responses shaping the short-term.

External shock inflation and structural currency resistance

“On Good Friday, Turkey’s statistics office will release March CPI and PPI data. Market expectations point to a slight slowdown in the headline CPI year-on-year, but an acceleration in core inflation. However, in the current circumstances, our usual approach of translating and analyzing year-on-year changes into seasonally adjusted month-on-month changes makes little sense.”

“The landscape has changed dramatically, making the data outdated due to higher energy prices in the coming months (futures mean we may not know the latest prices immediately).”

“…the impact of permanently elevated energy costs may prove to be in vain. For now, we note that Istanbul’s CPI inflation declined slightly in March to 37.7% year-on-year, down from 37.9% in February, while rising by 3% month-on-month.”

“At the national level, we expect a similar trend, likely reflecting strong growth of approximately 2.5% month-on-month. These figures are outdated as anecdotal media reports indicate significant increases in the costs of necessities such as bread and transportation.”

“For now, while the March CPI data will provide some insight into the pre-existing trajectory, its implications for markets will depend only on geopolitical developments in the coming weeks.”

(This article was created with the assist of an artificial intelligence tool and has been reviewed by an editor.)