JP Morgan Overweight in TRY as Further Weakness Would be Unhelpful for Inflation

In a note published yesterday, JP Morgan say they remain overweight in TRY:

• “Macroeconomic policy continues to move in the right direction, with higher interest rates and lower credit growth… Our economist projects further 500bp of policy rate hikes this year to 35% and another 1000bp in 2024 to 45%.”
• "One of the key risks remains whether the commitment to the tight policy mix can be maintained through the local elections in March 2024.”
• “Stability in EURTRY may point to some desire to reflect overall risk appetite and USD trends in lira’s behaviour… Our key argument for TRY OW is that further FX weakness would currently be unhelpful for the inflation outlook, competitiveness should be of little concern given cheap valuations, while the tightening delivered suggests authorities can keep TRY stable while rebuilding FX reserves.”
• “This in our view gives sufficient risk reward vs. FX implied yields at over 40%.”