Goldman Sachs Turkey inflation report: Energy prices pose a risk
Goldman Sachs analysts stated that the contraction in domestic demand in Turkey supports disinflation, but the rise in energy costs puts pressure on year-end targets.
In an analysis prepared by Goldman Sachs economists Clemens Grafe and Başak Edizgil, it was stated that the weakening of domestic demand in Turkey contributes to the disinflation process, but rising energy prices pose upside risks to the 29 percent inflation target projected for the end of the year.
Current status of inflation data
Annual inflation fell to 31.5 percent in August. While this rate followed a course in line with market expectations, it remained slightly below the bank's own estimates.
Core inflation and the service sector
Seasonally adjusted data show that core inflation momentum remains flat at around 1.8 percent. The rate of price increases in the service sector has also slowed to a level consistent with the general trend.
Energy risk in the disinflation process
It is projected that the weakness in domestic demand will continue to support the disinflation process. However, it is noted that the increase in global energy prices offsets this positive effect and poses a risk to inflation targets.
CBRT monetary policy expectations
Due to the lack of a clear decline in the inflation trend and the impact of energy costs, the Central Bank of the Republic of Turkey (CBRT) is expected to maintain its tight monetary policy stance. Analysts anticipate that the policy rate will be kept unchanged in the near term.