Experts interpret the March inflation

►INFLATI•N TO BE AT 40% IN JANUARYòJUNE: DR. ATILIM MURAT

The business world and the general population do not know which institution is fighting against inflation. There is a negative real interest rate of 47% while the Central Bank’s (CB) policy rate is 14% and annual inflation is 61%. There is no tight fiscal policy. There are many factors out of our control, such as commodity prices and the supply chain. But what will the CB do? Will the CB raise the interest rate by 50 points? I think that we’ll see annual inflation above the market expectation. I estimate 40% inflation for the first six months of the year. This means that annual inflation may reach 70-80%. We shouldn’t rely on the base effect decline in December to fight inflation.

►DòPPI AT ITS HIGHEST LEVEL SINCE THE 1994 CRISIS: SERHAT GURLEYEN

The Domestic Producer Price Index (D -PPI), which rose by 9.2% monthly and 115% annually with the adverse impacts of the foreign exchange (FX) rate shock and international prices, reaching its highest level since the 1994 crisis, indicates that the surge in inflation will continue in the upcoming months. We expect annual inflation to hover around 60-70% in the coming months due to the Russia-Ukraine war, the delayed impact of the FX shock, and deterioration in pricing behaviors. If a U-turn isn’t made 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 will revise 2022 inflation expectations to 53% and year-end inflation for 2023 to 27%.

►F► RATE TRANSITIVITY IMPACT CONTINUES: SERKAN GONENCLER

The energy category, which rose by 11%, made the highest contribution to the Consumer Price Index (CPI) as petroleum prices surged by 35-40%. Food inflation continued to have a high course at 4.7%. Core inflation, which reached 4.4%, shows that the impact of FX rate transitivity continues on the durable goods and basic goods groups. The upward trend in inflation continues and will continue for at least a few months. We estimate annual inflation to reach around 70% as of May.

►HIK▶ TO CONTINUE IN FOOD AND TRANSPORTATION: SELTEM IYIGUN

The surge in food and transportation will continue under the current geopolitical conditions. The hike in the D-PPI will continue to affect the CPI in the coming months. The transitivity impact may become modest if domestic demand slows as high inflation erodes disposable income and consumer confidence remains low. However, this situation will create pressure on the profitability of companies because of increasing costs. The inertia that has emerged as a result of deterioration in inflation expectations and pricing behaviors will take time to be reversed.