USD/TRY: Inflation-FX fundamentals are disastrous for the lira – Commerzbank

Turkey’s CPI/PPI data for August featured 80% headline inflation rate, 66% core inflation rate and 144% PPI inflation rate. The outlook for the lira remains bleak, economists at Commerzbank report.

The benchmark rate cannot probably be raised

“What is so good about the data? Sure, more accurate statistics might have shown 90% inflation rate instead of 80% – and of course, we do not trivialise the need for honest statistics – but, why would anyone call the situation better if inflation were to moderate slightly (year-on-year) in coming quarters as lower commodity prices and base effect began to play a role?”

“If the lira needs defending, policymakers will probably only deploy ad hoc soft capital control measures – the benchmark rate cannot probably be raised.”

“How does an 80%, instead of 81%, inflation print vindicate policymakers?”