Turkey: Inflation falls to lowest level since December 2021 in March
Latest reading: Inflation eased to 38.1% in March, below February’s 39.1%. March’s figure surprised markets to the downside and represented the lowest inflation rate since December 2021. The decline was driven by softer price pressures for housing and utilities, textiles, and transportation.
As a result, the trend pointed down, with annual average inflation coming in at 51.3% in March (February: 53.8%). Meanwhile, core inflation fell to 37.4% in March from the previous month’s 40.2%.
Lastly, consumer prices rose 2.46% from the previous month in March, accelerating from the 2.27% increase recorded in February.
Outlook: Inflation is projected to cool further in the coming quarters. Despite the recent crash of the lira, the Central Bank’s immediate policy tightening and FX market intervention should help disinflation remain on track. A high base of comparison will also support disinflation in the near term.
Panelist insight: Clemens Grafe and Basak Edizgil, economists at Goldman Sachs, commented:
“Risks to the inflation momentum have become somewhat more balanced after the recent tightening of financial conditions, although this also depends on whether there will be offsetting responses from income or fiscal policy going forward. We maintain our forecast for the TCMB to hike its policy rate by 350bp at the next policy meeting in April given the large reserve losses in the past weeks, but today’s downside surprise, at the margin, raises the risk of an on-hold decision.”