Ghose at Commerzbank expects Turkey’s May Consumer Price Index (CPI) to show only modest month-on-month moderation after April’s spike, keeping inflation momentum uncomfortably high. He focuses on seasonally adjusted monthly data rather than year-on-year rates and warns that the CBRT’s reluctance to hike, combined with renewed Lira depreciation, raises the risk of faster currency losses and further inflation pressure in coming months.

CBT reluctance heightens depreciation risk

"Turkey’s statistics office will release May CPI and PPI data today. Estimating from consensus year-on-year forecasts, analysts expect a slight moderation in the month-on-month increase (seasonally-adjusted) after April’s spike, but even so, May would still mark one of the stronger monthly readings of 2026 (the consensus forecast translates to 2.5%m/m sa)."

"April had already shown that inflation is running elevated – and the root cause from higher commodity and energy prices has not disappeared – precisely why we argued in our preview for March data that exact inflation readings will be somewhat beside the point in coming months."

"That remains the key point now. A modest easing in May’s seasonally adjusted month-on-month rise would not tell us that underlying disinflation is back on track. It would merely follow an exceptionally strong April print and still leave inflation momentum running at an uncomfortably high pace."

"This is especially relevant because CBRT continues to send the signal that it does not want to hike rates. That stance was already problematic when inflation momentum was merely sticky; it is more problematic now that the lira has begun to show faster depreciation"

"If policymakers keep implying that no rate hike will be considered, there is an increased chance that lira depreciation will accelerate further in the coming months, adding yet more pressure to inflation."

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