The monthly inflation soared by 4.75% in September. Thus, the 3-month hike exceeded 25%, while the 9-month and annual increase reached 50% and 61.53%, respectively, last month. The 12-month increase in core inflation exceeded the headline inflation at 68.93%.
►INFLATION IS PERSISTENT: SERHAT GURLEYEN
We are against persistent inflation as the services inflation continues at full speed versus a slowdown in goods prices. The economy administration should press ahead with monetary tightening. The indicators for the Consumer Price Index (CPI) with specific coverages show the dimension of the separation between goods and services pricing behaviors. Durable goods, excluding gold, rose by 2.9%, and energy and non-food goods increased by 3.6%, according to the seasonally adjusted series. Monthly inflation significantly decreased in goods prices. However, the service prices continue to rise. The seasonally-adjusted services prices climbed by 9.5% in July, 8.9% in August, and soared by 7.5% in September. The services prices didn’t decrease much compared to previous months and almost tripled the goods inflation. The hike stems from the increase in rental and education prices.
►RIGIDITY CONTINUES IN SERVICES INFLATION: SERKAN GONENCLER
As the Central Bank pointed out in the last Monetary Policy Committee (PPK) meeting summary, the wage and FX rate-driven pressures have eased, but rigidity continues, especially in services inflation, due to the retroactive pricing tendency. The hike in durable goods and basic goods groups, which soared by around 20% in the previous two months when FX rate transitivity was strong, fell to 2.6% and 2.7%, respectively. But the services inflation increased by 9.8% in July, 9.2% in August, and 7.9% in September. These sharp hikes reflect the deteriorations in the retroactive pricing tendency and pricing behaviors with the impact of ongoing solid domestic demand. The headline CPI inflation roughly declined from 86% to 38% in October 2022-June 2023 when the services inflation hovered around 60%. It has reached 86.5% over the past three months. Accordingly, we forecast the annual services inflation to reach the three-digit levels even if the current increase tendency slightly eases.