Citigroup Evaluated Turkey's Inflation Data

Citigroup evaluated Turkey's inflation data. The institution said that inflation did not change the interest rate outlook.

Citigroup, in a research note it published, stated that the lower-than-expected inflation in Turkey did not change the interest rate outlook, that the disinflation process would be difficult and that one should be cautious about the inflation outlook. Citigroup found the Central Bank of the Republic of Turkey's (CBRT) year-end inflation forecast of 12.2% to be optimistic and stated that they expect interest rates to remain at this level in the short term due to low capital inflows, increased risk premium and price pressure. Pointing out that the weakening in Turkey's inflation dynamics is not cyclical but permanent, Citigroup said that they estimate the inflation trend to be around 8 percent before, but now the estimate is around 13 percent. Pointing out that the exchange rate pass-through in the Turkish lira has increased according to its latest studies, Citigroup commented that the disinflation process will become more difficult with the depreciation of the Turkish lira. Expecting inflation to stay above 16 percent until November 2021 despite the strong base effect in the May-December period, Citigroup predicted that inflation could fall to 14.5 percent in December.