Mov ng above the 20 percent handle
The annual headline inflation is expected to rise markedly in September due to continued scars from massive weakening in the lira, higher utility and food prices and unsupportive base effects. Pump prices were higher by 6 percent on average due to an alteration in the administrative cap inserted from midMay onwards. Core inflation should see a marked rise, too. We expect the annual headline inflation to reach 21.3 percent year-on-year, the first print above the 20 percent handle since 2003. More importantly, we look set to see the highest monthly print (3.6 percent month-on-month) since the 2001 crisis. Uncertainty is high to either side with the seasonal decline in clothing and ongoing hard landing pushing prices down while intense pressure on profit margins due to rising costs exerting upward pressure. Some dailies, such as Dunya, last month mentioned the possibility some TurkStat Surveyors were not able to conduct the second price-collection survey during the second half of the month due to official holidays. It remains to be seen whether the new prices would also reflect accumulated rises between the first half of August and endSeptember. The Central Bank of Turkey is already poised for a high September CPI print, as manifested in new CPI projections published in the New Economic Program, which foresees end-2018 headline CPI at 20.8 percent year-on-year. A large upside surprise could raise question marks about the tightness of monetary policy against inflation outlook and may prompt CBRT action, perhaps by moving the marginal effective rate from one week repo at 24 percent to overnight lending rate at 25.5 percent via the liquidity channel, if required.