Foreign institutions updated their inflation expectations for Turkey

After the higher-than-expected June inflation data, Goldman Sachs raised its year-end inflation forecast for Turkey from 15.5 percent to 16 percent. Citigroup, on the other hand, stated that they do not expect any further rate cuts this year after the inflation data.

In a note shared with its customers, Goldman Sachs said, “After the hike in electricity and natural gas prices and the upside surprise experienced today, we are increasing our year-end forecast to 16 percent,” Goldman Sachs emphasized that the Central Bank of the Republic of Turkey will have the opportunity to lower interest rates very slightly in the fourth quarter.

Citi said after the inflation data, “Conditions for monetary easing are getting more and more difficult. “We don’t expect a reasonable rate cut in November or December,” he said.

While Barclays has raised its year-end inflation forecast for Turkey from 13.8 percent to 14.8 percent, it expects the CBRT to cut 250 basis points in the fourth quarter instead of a 350 basis point rate cut.

The US investment bank JPMorgan also lowered its year-end inflation expectation for Turkey from 13.4 percent to 14.7 percent, and the end of 2022 consumer inflation forecast to 10.5 percent from 10.5 percent, after the June inflation exceeded expectations took it out.

PPI-CPI scissors are at the top

Consumer prices rose 17.53 percent in June compared to the same period of the previous year, reaching the highest level since May 2019. According to the data announced by the Turkish Statistical Institute, the monthly increase in consumer prices was recorded as 1.94 percent.

TURKSTAT data showed that the upward momentum in producer prices continued unabated in June. Accordingly, while the producer price index was 42.89 percent in June compared to the same period of the previous year, the gap between producer inflation and consumer inflation peaked.

Update from Deutsche Bank and inflation

Deutsche Bank announced in a research report that they revised their year-end inflation forecasts from 15 percent to 16 percent after the hikes in electricity and gas prices.

Stating that the weight of natural gas in the inflation basket is 1.69 percent and electricity is 2.71 percent, the institution said that the direct impact of these hikes on inflation will be 61 basis points.

Emphasizing that the effect of the price hikes made at the beginning of July can be better understood with the inflation data for July, Deutsche Bank stated that they expect inflation to rise rapidly in July to reach above 18 percent.

The institution, which updated its year-end forecast for USD/TL from 9.00 to 9.50, underlined that the recently announced required reserve measures signaled a return to unconventional monetary policy measures.

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