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TURKEY - In Brief 03 Feb 2015 by Murat Ucer

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January CPI inflation came in at 1.1%, which is higher than both consensus (0.7%) and our slightly higher forecast (0.8%). Most importantly, data proved the overly optimistic expectations by the CBRT wrong and, as has just been stated by the Bank on its website, eliminated the (by-now notorious) possibility of an extraordinary meeting tomorrow. Twelve-month CPI inflation nevertheless declined significantly to 7.2% from 8.2% a month earlier, thanks to lower oil prices and favorable base effects. Twelve-month PPI inflation, which captures the cost-side of the equation closely, dropped sharply to 3.3% from 6.4% a month earlier, which is favorable, but core inflation (I-index) eased only marginally to 8.6% from 8.7% in December. In seasonally-adjusted terms, we estimate that core inflation is still hovering around a monthly pace of 0.55%, or an annualised rate of over 6.5%, which attest to a certain degree of stickiness in inflation dynamics that we've been fearing. Assuming recent currency volatility will not last (and ongoing pressures on the CBRT will not lead to very significant lira weakness), we still work with inflation decelerating to around 6% by summer months, but then edging back up, mainly on the back of our “stickiness” assumption, to 6.5%-7% range. We shall issue a somewhat more detailed note, with the usual charts and tables, later today...