Commerzbank analyst Tatha Ghose anticipates that Turkey's June Consumer Price Index (CPI) will show a modest disinflation surprise, with both headline and core inflation rates expected to ease slightly compared to the previous month. The analyst consensus forecasts headline CPI at 32.1% year-on-year and core CPI at 30.1% year-on-year, both indicating a softer inflation environment than previously observed. Month-on-month inflation is projected to be potentially below 1% [1].
Despite this anticipated moderation, Ghose cautions that underlying inflation in Turkey remains high. After seasonal adjustment, the expected data would still imply a 1.8% month-on-month rate of increase, which annualizes to approximately 24% underlying inflation. Ghose suggests this may represent only an interim low, with the month-on-month rate likely to rise again in the future [1].
Ghose also notes that while global disinflation is occurring, as seen in other European countries like Poland where month-on-month price changes have turned negative, this trend is only weakly benefiting Turkey. The analyst emphasizes that Turkey's inflation problem is primarily domestically driven and entrenched in expectations, rather than being imported from abroad [1].
Given these conditions, Ghose warns that interest rates in Turkey cannot be safely lowered without risking renewed weakness in the Turkish Lira. If the Central Bank of the Republic of Türkiye (CBRT) signals that rate cuts are imminent, the Lira could face renewed pressure in the market [1].
CONCLUSION
While Turkey's June inflation data may offer a modest disinflation surprise, underlying inflation remains high and domestic pressures persist. As a result, the Turkish Lira is likely to stay vulnerable, and interest rates cannot be safely reduced without risking further currency weakness.