Turkey | The CBRT maintains the current stance

Summary

The Central Bank of Turkey (CBRT) kept the policy rate (one-week repo) at 19% in line with the expectations. Given the worsened inflation outlook, the CBRT tries to manage by eliminating any early rate cut expectations thus, we expect an easing cycle only very gradually in late 3Q and end the year with 16% policy rate.

Key points

• Key points:
• The CBRT acknowledges that the decelerating impact of the monetary tightening on credit and domestic demand has begun to be observed however also underlines the need to keep the current monetary policy stance until the significant fall in the April Inflation Report’s forecast path.
• Rising global inflation expectations on both higher commodity prices and its potential effects on the markets, high levels of inflation and inflation expectations highlighted by CBRT.
• Strengthening cost push factors, supply side constraints on pandemic, decelerating but still effective domestic demand and continuing pass-thru impact, we expect consumer inflation to fluctuate around 17% till November and complete year at 15%.

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