Monthly inflation in March stood at 1.94% vs market consensus at 2.3% (and our call at 2.2%), while annual inflation resumed a downtrend with a fall to 30.9% (vs the Central Bank of Turkey’s target at 16% and forecast range of 15-21% in the latest inflation report) from 31.5% a month ago. The food group was the key driver for the positive surprise in the headline rate, though pricing pressures in the energy group have increased with the geopolitical shock, as expected. While inflation rose by 2.5% in March 2025, the five-year average for January in the CPI index was 2.9%.
Core inflation (CPI-C) rose by 1.64% month-on-month, leading to an increase in the annual rate to 29.7%. The currency managed by the central bank, with a modest nominal lira depreciation in recent months, limited the increase. In March, PPI stood at 2.3% MoM, moving up to 28.1% YoY, after floating at 27-28% in the previous five months.
In addition to food products, coke & refined petroleum products, chemicals, and basic metals were the major drivers in the March PPI increase, likely reflecting the impact of the Gulf War on some industrial materials. Global commodity prices and particularly oil prices in the current geopolitical backdrop will remain the key risk factors to the PPI trend in the near term.
