CBRT Statement Sees Ukraine-Related Tweaks as Higher Energy Prices Weigh on the Outlook

Statement Analysis:

• As expected, the CBRT left rates unchanged at 14.00% - in line with the unanimous consensus. The March statement is mostly similar to February’s, but cites supply-side pricing risks emanating from the Ukraine war.
• The most notable change is the removal of predictions for a current account surplus in 2022, which has been exacerbated by rising energy prices and a dire tourism outlook. This is responsible for marginal TRY weakness following the decision with USD/TRY trading +1.05% higher on the day.
• Pricing dynamics were assessed as being driven by supply-side factors and would fade once the Ukraine crisis found a resolution. Nevertheless, markets anticipate a sharp rise in inflation in May/June, to 60-65% - adding headwinds to the CBRT’s unsustainable policy mix.
• Looking ahead, the bank remains in wait & see mode with policy likely to remain unchanged in the near-to medium-term.