Macro and Politics

*The CBT will release March Real Effective Exchange Rate (REER) today @14:30 local time. Considering the inflation data and the average Basket/TRY change for March, we expect the REER to decline from 74.96 to 73.4, implying a 2% real depreciation of the Turkish lira.

* The CBT will release weekly international reserves for the period of March 21 – 28 @ 14:30 local time. Based on our calculations upon the CBT’s analytical balance sheet, we estimate that during the week of March 21 – 28, the net international reserves decreased by USD7.3bn to USD54.8bn and the gross FX reserves slid by USD6.6bn to USD156.7bn. We anticipate that today’s official reserve data will likely reflect a similar trend in line with our calculations. Please note that the weekly foreign portfolio flows and money & banking statistics, typically released alongside the reserves data, will be published next week, on April 7, Monday @ 14:30, due to the public holiday.

* TURSTAT will release March seasonally adjusted CPI and special CPI aggregates today @16:00 local time. Based on our calculations, we forecast the seasonally adjusted monthly CPI change for March to be approximately 2.5%. We expect a similar outcome in today’s adjusted figures.

* The CBT will release the Monthly Price Developments report for March today @18:00 local time. The report is a technical one and does not contain a policy message. Still, the assessment of trend core inflation will be monitored closely.

* The CPI recorded a monthly increase of 2.5% in March, lower than our house forecast and the median estimate of 2.9%, with the annual CPI easing further from 39.05% to 38.1%. Besides, the PPI rose by 1.9% m/m, with the annual PPI declining from 25.2% to 23.5%.The deviation between our house forecast and the actual figure was largely attributable to the clothing & footwear and health categories. Core indicators point to a more subdued price momentum in March, with Core-B rising by 1.3% m/m, while the annual increase moderated from 39.5% to 37%, and Core-C registered a 1.5% monthly rise, with the annual increase easing to 37.5%— the lowest level since December 2021. We have recently revised our year-end CPI forecast from 28% to 31%. In the current economic environment, where FX pass-through remains elevated, we expect the recent volatility in TL assets, amidst heightened political tensions since March 19, to significantly impact the April inflation outcomes.