Exchange rate pass-through effects increase the inflationist risks...

We expect a monthly increase of 1% inflation, and realization of the annual inflation level of 11.9%, in August for Turkey.(Tera Yatırım)

Especially in the period in August, with the the depreciation of TRY, the deviation range for inflation may widen in the coming months in terms of costs arising from exchange rates. This will mean that inflation will remain in the double-digit zone throughout the year. At this point, the pass-through effect from the exchange rate, which is expected to have an effect on imported goods and inputs, in addition to the changing price balances caused by the pandemic, may have an increasing or high restraining effect on inflation. The increase reflected in the PPI may cause high CPI increase in the following months.


The upside risks regarding the revision of the inflation expectations made by the Central Bank towards the level of 8.9% due to pandemic conditions at the present point increased. Market players and the real sector have an average expectation of 10.8% at the end of the year, as can be seen in the CBRT Expectations Survey. Inflation seems to realize above the current policy rate of 8.25% by the end of the year. This interest rate is ineffective within the framework of current funding conditions, and the weighted average funding cost has increased to 10.16% as of 2nd September. In the last MPC, that there was no direct policy rate increase or interest corridor adjustment, it was stated that liquidity management would continue. We will continue to monitor the effects of the Central Bank's side-way policy tightening as the main determinant in terms of TRY stability and its inflation reflection.


Kaynak Tera Yatırım
Hibya Haber Ajansı