Inflation risks seem balanced

May inflation in Turkey, will be announced on Wednesday. Our expectation is that, monthly inflation and annual inflation will be 0.9% and 10.9% respectively, in May

We see the downward and upward risks of inflation balanced. Primarily; When we look at the demand component, we can evaluate the increase in basic consumption and its price effect as an upward factor depending on the order of priority in consumption preferences during the coronavirus pandemic period. On the other hand, the lack of demand related to the slowdown in the economy in private consumption is a situation that will affect the inflation downward. In the cost component, we consider falling crude oil and commodity prices and the depreciation in TRY as balancing factors. Since mid-May, the stabilization of TRY limits the risks arising from exchange rates, but we know that the reaction of goods and services prices to the increase in exchange rates and the reaction to the decrease are not the same.

 

We expect inflation to be realized in line with the resilient inflation outlook in the first half of the year. Although the base scenario is for the fall in inflation to gain weight in the second half of the year, we think that the new price balances that will occur in the post-pandemic normalization period should also be taken into account. The cumulative demand effect in private consumption, the effects of cuts in production and service supply on prices, and cost factors are variables that may bend inflation risk upwards. We maintain our weak double digit expectation for the end of the year at the threshold of current conditions.

Source: Tera Menkul
Hibya News Agency
 

Okunma