Commerzbank’s Tatha Ghose argues that upcoming Turkish CPI data are largely obsolete given the looming impact of higher energy prices. He expects a strong March monthly print but stresses that external-shock inflation may be treated as transient by FX markets. Regardless, he maintains that the Lira is likely to continue a steady structural depreciation path, with geopolitics shaping near-term reactions.

External shock inflation and structural FX drag

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

"The landscape has shifted dramatically, rendering the data obsolete because of higher energy prices in the coming months (forward contracts mean that we may not witness the latest prices immediately). "

"... the impact of permanently elevated energy costs could prove futile. For now, we note that Istanbul’s CPI inflation eased slightly to 37.7% year-on-year in March, down from 37.9% in February, while continuing to rise by 3% month-on-month."

"At the national level, we anticipate a similar pattern, likely reflecting a strong increase of approximately 2.5% month-on-month. This is out of date because, anecdotally, media reports indicate significant rises in costs for essentials such as bread and transportation, since."

"For now, while the March CPI data will provide some insight into the pre-existing trajectory, its implications for markets will only hinge on how the geopolitical situation evolves in the coming weeks."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)