March inflation print: more of the same
Consumer prices rose by 1%, m/m, in March, broadly in line with the consensus, with the 12-month CPI inflation hence remaining flat at some 19.7%. Twelve-month domestic-PPI inflation was also unchanged, at 29.6%, with both indicators, as well as the spread between the two -- at around 10 percentage points -- still remaining rather elevated.
In terms of contributions, the composition of drivers of CPI inflation were rather similar to the same month of previous year (Graph 2), which is sort of interesting, because it arguably suggests that broader inflation pressures, despite the negative output gap of the past few quarters, are not easing all that much. That the 12-month core inflation has eased further to 17.5%, from 18.1% in February for a fifth consecutive month and that it is running around (a seasonally-adjusted) 0.5% per month pace is encouraging, but whether this signals a true break in core inflation trend can be ascertained only after the lira-driven volatility in core inflation that began late last year fully runs its course . In fact, if anything, recent lira weakness suggests that the ongoing drop in core inflation may take a pause in the coming months.
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