Commerzbank’s Tatha Ghosh argues that Türkiye’s brief deflation relief is already outdated as high oil prices and external shocks dominate. Headline CPI slowed in March, but core dynamics remain strong and reliability concerns remain. Rising energy costs, rising trade deficit, capital outflows and heavy intervention make the Turkish Lira more vulnerable to disorderly adjustments if the regional war does not subside soon.
Deflation story eclipsed by energy shock
“Turkey’s March CPI print offered a brief moment of relief last Friday, with headline inflation slowing to 30.9% per year and 1.9% per month – below most estimates. Yet this negative surprise already looks stale.”
“The final and most important point: The renewed rise in energy costs points to further reversals – so, backward-looking March data is beyond this point.”
“The change in outlook due to the oil price is not hypothetical: policymakers have been clear that the oil price shock will be far from material, with Finmin Mehmet Simsek estimating a 3.6-4.4 pps impact on inflation if oil stabilizes around US$85/bbl (we think it will).”
“The current account situation had been deteriorating since the end of last year as interest rates were being cut – now the outlook has become completely negative.”
“However, we feel that lira management is becoming increasingly fragile (resulting in significant depletion of resources). If the war does not subside soon, the likelihood of disorderly adjustment will increase significantly.”
(This article was created with the help of an artificial intelligence tool and reviewed by an editor.)
