ING’s Chief Economist for Turkey, Muhammet Mercan, notes that April inflation rose more than expected, with annual Consumer Price Index (CPI) reaching 32.4%, well above the Central Bank of Turkey’s 16% target. Food, housing and transportation led the upside surprise, while core and services inflation remain elevated. ING highlights that higher Oil prices, dollarisation risks and moderating growth prospects limit scope for Central Bank rate cuts.

ING flags narrowing room for rate cuts

"Turkey's monthly inflation in April stood at 4.1%, above the market consensus of 3.2% (and our call of 2.9%), while annual inflation recorded a marked increase to 32.4% from 30.9% a month earlier – above the Central Bank of Turkey's 16% target and forecast range of between 15-21% detailed in its latest inflation report."

"Preliminary seasonally adjusted data, published by TurkStat and closely monitored by the CBT, indicates that the underlying inflation trend in three-month moving average terms recorded across the board increased in the headline, core and services, implying challenges to disinflation in the current environment."

"Overall, April's inflation spike confirmed both the challenging road ahead and an increase in the annual figure."

"Global commodity prices – particularly oil prices – in the current geopolitical backdrop will remain the key risk factors for the PPI trend in the near term."

"The current environment – which poses significant challenges to the Bank given rising energy prices, moderating growth prospects, and dollarisation risks – narrows the room for rate cuts."

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