Turkey | CBRT made changes for the future stance

Summary

CBRT altered forward guidance to more dovish side as referring tight stance by means of keeping the policy rate unchanged and promised to keep the policy rate at a level above inflation.

Key points

• Key points:
• The MPC decision carried important changes by removing the two forward guidance remarks on the tight stance: (i) additional monetary tightening will be delivered if needed, (ii) the continuation of the decisive tight stance for a long period of time.
• Due to ongoing cost push factors, stronger global commodity prices, supply side constraints on pandemic, still robust demand and accelerating pass-thru impact from the recent currency depreciation, we expect consumer inflation to remain near 18% in 2Q and fluctuate around 17% till October before declining to 15% at the end of the year on the back of favorable base effects in the last two months.
• Although our Taylor rule implies a need for further tightening given the worsened inflation outlook, we expect the CBRT to stay on hold till September and start an easing cycle only very gradually thereafter.

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