Experts interpret the January inflation
►HIGH INFLATION STEMS FROM FOOD AND TRANSPORTATION: PROF. DR. ERHAN ASLANOGLU
Inflation continues and will continue to rise. The increase stems from the energy and transportation groups and their reflection on the housing group. The negative trajectory for food continues. Transportation and food inflation hovered around 68.9% and 55.1%, respectively, in the last year. The core Consumer Price Index (CPI) and Domestic Producer Price Index (D -PPI) data shows that the adverse impact of foreign exchange (FX) rates decreased in January as compared to December. However, the energy group, one of the D -PPI sub-items, rose by 142%. Considering the ongoing pressure on energy and food prices in the global economy and the indirect impact of price adjustments, the pressure of the D -PPI on the CPI will continue even though the FX impact is declining. The possible demand pressure that could be created by the negative real interest rate will become another inflation factor in an environment where supply has slowed.
►THE HIKE ISN’T TEMPORARY: SERHAT GURLEYEN
Core inflation data shows that the rise in headline inflation isn’t temporary. The seasonally-adjusted (SA) monthly B and C indices continue to have an upward course at 7.5% and 7.0%, respectively. The SA durable goods prices excluding gold as well as energy and non-food goods prices surged by 6.3% and 8.1%, respectively. Services prices rose monthly by 7.4% with the deterioration of expectations and pricing behaviors and contributed to headline inflation deterioration. We estimate inflation to hit 55-60% in the coming months. If we don’t make a U-turn from the current over-expansionary monetary and revenue policies, we don’t see any reason for inflation to spontaneously decline besides the base effect. In the base scenario where we assume the year-end USD/TRY is 17.00, we revise the 2022 inflation to 40% and the year-end inflation for 2023 to 17%.
►ANNUAL INFLATION MAY EXCEED 50% IN FEBRUARY: SERKAN GONENCLER
An increase in electricity, natural gas, and fuel prices made the biggest contribution to inflation. Food inflation based on fruits, vegetables, and processed goods reached nearly 11% and contributed to inflation. FX rate transitivity continues despite a slowdown in the pace. Durable goods inflation and other basic goods inflation saw 6.4% (30.3% last month), and 10.0% (13.4% last month), respectively. Services inflation hit 7.8% after the price hike in public transportation and the general surge in prices affected pricing behaviors. We estimate the CPI to exceed 50% in February, or in March at the latest, with the impacts of cumulative FX rise on services inflation and the indirect impact of the price hike in energy.
►BASE EFFECT TO CONTRIBUTE INFLATION DECREASE BY H2: SELTEM IYIGUN
High monthly increases and deteriorated expectations have produced inertia in inflation. If FX rates at home and energy prices abroad are stabilized, annual inflation may start to decline as of the second half (H2) of 2022 with the base effect. We believe that the Central Bank will most likely wait to intervene or reduce policy rates under these inflation conditions.