Turkey's May CPI will most likely reflect stickiness

Turkey will release May CPI figures on Wednesday 3 June. The CPI figure is likely at 7.5%, from 7.9% in April and 9.6% a year ago, forecasts Stnadard Chartered. While CPI was widely expected to decline steeply this year compared to last, our view has always been more reserved. As expected, lower oil prices were the largest contributor to decelerating inflation. 

However, the rapid depreciation of the lira (TRY) has acted as a brake, as pass-through effects of the weaker TRY on the CPI have demonstrated. Average CPI inflation in the first four months of this year stood at 7.57%, versus 8.35% the year before. While an improvement, this is far from what had been expected and the central bank (CBRT) was recently forced to raise its year-end CPI forecast to 6.8%, notes Standard Chartered.