We think that the main outlook and periodic changes in inflation are not in line with each other, and in fact, the phenomena in question should be handled differently from each other. In this respect, we believe that there is not enough data to confirm the long-term decline in addition to the base effect-induced decline expected in 4Q21. We expect a 0.5% monthly increase in August inflation, which will be announced tomorrow, which will bring inflation to 18.5% on an annual basis. There may be a limited decrease from the 18.95% level in July. In 4Q21, a favorable base effect may work due to the high seasonal changes in the similar period of last year. In this context, we still make a more cautious estimation than the CBRT and maintain our 16% year-end forecast, while keeping upside risks reserved.
If we start with the factors that can alleviate inflation periodically; activities aimed at limiting the demand side aim to add factors other than the base effect to inflation. We can group factors such as macroprudential measures, limiting installments, and considering regulations for consumer loans, in order to reduce the effect of demand inflation. In terms of the tax effect on prices, we can of course add the administered prices to this; We will observe the price-reducing effect of the SCT adjustment for passenger cars in August. Dealer prices, which are the subject of TURKSTAT calculation and reported in automotive, and consumer feedback on prices may be different. The base arrangement was reflected in the price reductions of 30K-40K TRY, according to the model, on the cars coming out of the dealership.
Monthly price increases continue, but in the following months, the base effect will come into play due to the high monthly increases of the previous year. Now, if we look at the main inflation metrics, it’s not that positive here. There are heavily out-of-control factors in the cost channel. Factors such as costs not reflected in PPI, food prices, and commodities will continue to be influential. Food is affected by climate, lack of supply, global food inflation (the global food price index announced by FAO continues to rise). Commodity prices have decreased a little recently, but there is an increase in the domestic market again due to the exchange rate effect. Elements such as raw materials, sectoral inputs, and energy still increase the cost effect. The price increase in inputs such as cement, iron and steel increases housing prices and rent inflation. From here we will arrive at the PPI. The CPI increase is not as significant as the PPI. This is mostly due to the fact that the manufacturer cannot reflect the cost it bears to the consumer price. This includes factors such as market conditions and purchasing power. It is worth noting that when the PPI-CPI relationship normalizes and the spread narrows, there is a risk that CPI will approach PPI. This will be a phenomenon that highlights the upward trend of the CPI, which is the reason for the rapid increase in the increase in demand in the economy, for example, in cases such as short-term increase in demand or the demand that has been brought forward.
At the economist meeting held yesterday; The Central Bank focused on the prediction that the temporary factors of inflation would also lose their effect and that the downward trend would be highlighted in 4Q21. Within the framework of the recovery in economic activity, the growth trend seems to follow a strong trend periodically. In particular, leading indicators such as industrial production and PMI show a strong growth outlook in 3Q21 as well. Against this; In terms of the course of domestic demand, the interest shown in consumer loans (this weighting in individual loans is mostly going to personal debt rollover or consumption) has an increasing effect on imports and inflation. The Central Bank pointed out that the effects of macroprudential measures on consumer loans are limited and stated that an additional instrument other than the policy rate should be used. In other words, we will see some regulations with banks on personal loans.
We see that the Central Bank has a tendency not to use its main policy tool in the direction of tightening in an environment where inflation is very close to the interest rate. The CBRT may be considering expanding the area to be opened with the base effect by reducing the demand component factor of inflation that can be controlled. This is the main line of our not expecting an action to rate hikes. Within the scope of the inflation, which will decrease to a certain extent due to the base effect in 4Q21, there may be limited rate cuts in a way that will keep the policy rate above the headline inflation. The fact that the Fed will also take steps in tapering in the last quarter requires that the interest rate position be adjusted at a sufficient level in order to absorb the impact from the global financial markets. Therefore, we can expect rate cuts on a very limited scale, we see September too early in terms of timing. October or November can be the subject in the sense that the picture is clearer. The next policy meeting of the Central Bank will take place on September 23, the day after the Fed meeting.
Kaynak Tera Yatırım-Enver Erkan
Hibya Haber Ajansı
Kaynak: Hibya Haber Ajansı
