Inflation at 19%, now what? Well, nothing

TURKEY - Report 03 Aug 2021 by Murat Ucer

Monthly CPI inflation came in at 1.8% in July, somewhat higher than the market consensus (of around 1.6%), with the 12-month rate thus rising to 19% (18.95%, to be precise) from 17.5% in June. Producer prices rose by 2.5% in the month, m/m, which led to a further increase in the 12-month rate to 44.9% from 42.9% a month earlier (Table 1; Graph 1).

Looking at the contributions to CPI inflation, the increase in the 12-month rate appears driven mainly by food and housing categories, with markedly higher contributions this July versus last (Graph 2). The former added +0.7 pp to monthly CPI inflation in July versus a negative contribution of 0.3 pps in the same month of previous year while the latter contributed about 0.8 pp in July this year, compared with some 0.1 pp contribution in July 2020.

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