TCMB Warns of Temporary Inflation Spike in July

The Central Bank of the Republic of Turkey (TCMB) expects a temporary rise in the core inflation trend for July.

Central Bank's Inflation Projection

TCMB forecasts a 45.5% inflation rate for July 2024, above May's 44.9% and June's 44.7%, but anticipates a retreat to 44.0% by August. The bank attributes the short‑term uptick to volatile energy prices and exchange‑rate pressures.

Market Reaction and FX Movements

■TRY/USD pair up 2.3%, reflecting a risk‑off sentiment among investors.

■BIST 100 index down 1.8%, with export‑oriented stocks bearing the brunt.

■Euro and Gold prices rise 1.5% and 0.9% respectively, bolstered by higher inflation expectations.

■Short‑term futures for July contracts trade at a 3.2% premium.

Sectoral Impact of the Anticipated Inflation Swing

■Energy: Natural gas and fuel prices projected to rise 6.4%, tightening cost structures.

■Construction: Cement and steel costs expected to climb 4.1%, pressuring project margins.

■Consumer Goods: Food prices forecast a 2.7% increase, keeping them a core inflation driver.

■Financials: Lending rates likely to be lifted by 150 basis points, enhancing banks' net interest margins.

Strategic Positioning and Technical Indicators

■Fibonacci Retracement: A pull‑back to the 38.2% level targets around 5,800 points for the BIST 100.

■Ichimoku Cloud: Closing within the Kumo signals a short‑term bearish bias, while the longer‑term trend remains bullish.

■200‑Day EMA: The index stays below 5,950; a decisive break above 6,050 would confirm a bullish reversal.

■RSI (14): Sitting near 45, indicating a neutral market without overbought or oversold conditions.

Caner Yılmaz – BIST 100 Technical & Quantitative Analysis Director: "While the TCMB’s temporary inflation spike raises short‑term risk premia, the technical chart still points to an underlying uptrend. A Fibonacci correction to the 38.2% zone is plausible, but a break above the 200‑day EMA could trigger a fresh rally. Investors should hedge FX exposure and consider sector rotation to navigate the evolving landscape."