TRY: Inflation did not moderate convincingly – Commerzbank

Turkish CPI eased marginally to 32.9% on year-on-year basis, but the underlying month-on-month rate of price change did not moderate convincingly at all, Commerzbank's FX analyst Tatha Ghose notes.

Fundamentals for the Lira are not improving

"After seasonally-adjustment, the headline index was up 2.3% mom while the core index was up 2.1% mom – the latter the fastest since April if one were to exclude last month’s spike. Food, non-alcoholic beverages, clothing, footwear and rent were prominent drivers. Domestic PPI climbed to 27% yoy in October, marking the third consecutive acceleration, while the Istanbul CPI also accelerated to 40.8% yoy in October."

"These figures indicate persistent and slightly broadening monthly price pressures, challenging the official disinflation narrative. The Central Bank of Turkey (CBT)'s 29% year-end forecast appears increasingly unattainable. Household inflation expectations have also accelerated, with the 12-month forward expectation rising to 54.4% in October, driven by administrative price hikes and food price acceleration. Households remain unconvinced that inflation will decline."

"For all these reasons, the Lira exchange rate did not react positively to the CPI print. The fundamentals for the Lira are not improving, and USD/TRY has now breached the 42.00 level."