The inflation data for May, which was announced yesterday, was questioned by many as the price increase consumers feel in their daily life is much more higher than the official figures. Already below expectations, Consumer Price Index (CPI) rose by 0.89% on monthly basis, while annual inflation rate surged by 16.59%, down from 17.14% in April, according to the Turkish Statistical Institute. The full lockdown measures said to have not been reflected in the price increase and pave the way for inflation to lose acceleration. The Central Bank Governor Sahap Kavcioglu said that inflation will draw a better picture in May compared to April.
This brings questions for July and August, as President Recep Tayyip Erdogan pointed out a possible interest rate cut by then. Analysts, on the other hand, don’t expect a change at the Monetary Policy Committee meeting to be held on June 17. They also state that an interest rate cut will fluctuate USD/TRY.
On the other hand, inflation figures in May gave a downward surprise,
The decrease in May inflation figures is mainly based on temporary factors, according to JP Morgan. “We continue to expect annual inflation to exceed 16% levels until November. We doubt that the data will have a significant impact on the monetary policy outlook. We still expect the interest rate cut to happen in September,” said the investment bank.
Looking at the money market, USD/TRY exceeded 8.70 after the U.S. released the private sector employment data yesterday. USD/TRY hovers around 8.71-8.72 this morning. EUR/TRY stands at 10.56.
Spot gold saw USD 1,855 per ounce yesterday after it fell to the lowest level in the last two weeks following the increase in USD and yields of the U.S. Treasury bonds. The yellow gold is traded at above USD 1,870 this morning.
Oil prices, which increased by the support of expectation towards the global economic recovery from the COVID-19 pandemic and demand increase, declined again due to the concerns over slow progress in vaccination in the Western countries yesterday. Brent crude is traded at USD 71.67 this morning.
DAILY AGENDA
The Central Bank will release the ‘Monthly Price Developments’ report on CPI figures.
The Central Bank will release the Real Effective Exchange Rate (REER) for May (2.30 pm). The CPI-based REER stood at 62.29 in April.
The international credit rating agency Moody’s will likely to release Turkey report. Moody’s maintains the country’s ratings at ‘B2’ with ‘negative’ outlook.
>> Conversations in Climate-ish Towards the Climate Summit to be held today in Glasgow 14.00 (GMT +3):
UNDP Turkey and the British Embassy will co-host the online event to discuss and comment on the climate crisis, suggesting a new language to think and talk: Climate-ish. This online Conversation in Climate-ish event that will be moderated by UNDP Turkey Goodwill Ambassador Mert Fırat, with the participation of UNDP Turkey and British Embassy encourages the public to think Climate-ish one day before the June 5 World Environment Day. The event will remark the issues that the COP26 summit will raise in Glasgow on 1st – 12th November 2021. For registration and to receive detailed information, you can visit: https://iklimce.undp.org.tr/conversations-in-climate-ish-world-environment-day/
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