Consumer price inflation came in at 1.1% m/m in January, more than the market expectation of 0.7% m/m. Consumer prices fell 0.44% m/m in December. Annual inflation eased to 7.24% from 8.17% in December, data of the statistics office TUIK showed on February 3.

Recall that Central Bank governor Erdem Basci made the rate cut conditional on a 1pp decline in annual inflation. Basci said on February 2 that the Bank would decide whether to hold an interim meeting on interest rates after the release of inflation data. Just minutes after the release of inflation data for January, the Central Bank said in a statement on its website that the Monetary Policy Committee (MPC) will assess the inflation outlook in detail at the regular meeting which will be held on February 24. This statement implies that there will be no interim MPC meeting and no immediate rate cut. The Central Bank’s decision will probably set Basci on a collusion course with the government. TRY firmed against the dollar after the inflation data and the Central Bank’s announcement. TRY traded at 2.4110 against the dollar versus 2.4275 before the release of inflation data.

The Central Bank lowered its end-2015 inflation forecast to 5.5% from a previous 6.1% in its January Inflation Report. The Bank forecasts an inflation rate of 5% at the end of 2016.

TUIK said that food prices rose 3.52% m/m, adding 0.85 percentage points to the headline inflation in January. Clothing prices fell 6.98% m/m shaving 0.51 percentage points from the headline inflation. Transport costs were down 0.56% m/m while communication prices rose 0.94% m/m.

The core inflation (measured by the I-index; one of the Central Bank’s favourite indicators) rose 0.22% m/m after dropping 0.38% m/m in December. The annual increase in the I-index eased to 8.63% in January from 8.73% in the previous month.

Domestic producer prices that fell 0.76% m/m in December 2014 rose 0.33%, bringing the annual inflation to 3.28% in January from 6.36% a month ago.