Macro and Politics
Tacirler Investment
*The CBT will release February Real Effective Exchange Rate (REER) today @14:30 local time. Considering the inflation realizations and the average Basket/TRY change for February, we expect the REER to increase from 102.17 to 103.6, implying a 1.4% real appreciation of the Turkish lira.
* TURSTAT will release February seasonally adjusted CPI and special CPI aggregates today @16:00 local time. Based on our calculations, we forecast the seasonally adjusted (SA) monthly CPI change for February to be approximately 2.7%. We expect a similar outcome in today’s adjusted figures.
* The CBT will release the Monthly Price Developments report for February 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.
* February CPI rose by 2.96% m/m, coming in slightly above both our house forecast of 2.9% and the market median expectation. Annual inflation accordingly increased from 30.7% to 31.5%. On the producer side, PPI rose by 2.43% m/m, lifting the annual rate from 27.2% to 27.6%. Despite the food-driven upside deviation, the deceleration in core indicators suggests that the disinflation process has not been fundamentally derailed. That said, the recent increase in energy prices has shifted the balance of risks to the upside. The sharp rise in oil prices following escalating US–Iran tensions and developments surrounding the Strait of Hormuz constitutes a material risk to the inflation outlook. Potential fuel price adjustments stemming from higher oil prices pose an upside risk to our inflation projections. Since the final week of February, we have observed a marked correction in vegetable prices. Accordingly, we expect some normalization in food inflation in March after the pronounced increases recorded in the first two months of the year. While the recent pullback in unprocessed food prices is constructive for the near-term outlook, the ongoing upward pressure in energy prices may partially offset this improvement. In this context, we assess that upside risks to our year-end inflation forecast of 23% have increased materially.