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Goldman Sachs See Upside Risks to 40% Terminal Rate Forecast

TURKEY
  • In Goldman Sachs’ view, the imbalance in policy tightening since June with credit expansion contracting more than monetary conditions mean that the downside impact of policy on inflation remains limited.
  • Although growth of money aggregates started declining in September, it is still running well above 100%. Additionally, despite strong rate hikes, inflation expectations continue rising up to 2 years ahead, which suggests that rates will still need to go higher to control the deterioration in pricing behaviour and restore confidence in TRY, Goldman Sachs say.
  • With 12m-ahead inflation expectations having risen from +41.2% y/y to +45.0% y/y in September and annual inflation likely to continue accelerating, Goldman Sachs see upside risk to their terminal rate forecast of 40.00%.

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