No change to the Central Bank of Turkey's one-week repo rate of 50% is expected this month.
Since the previous MPC meeting, headline inflation has risen to 68.50% in March from 67.07% the month prior (Est: +69.10%), with policymakers anticipating that disinflation will only be established in the second half of the year. Central bank Governor Fatih Karahan said at the Internation Monetary Fund/World Bank spring meetings in Washington last week that the Bank remains on course to hit its 36% inflation target by the end of the year and aims for single figures by the end of 2026. But overall, neither current nor expected inflation developments can be described as “significant” or “sustained” and therefore do not yet warrant consideration of easier monetary policy. Similarly, there has not been a notable deterioration in dynamics which would justify another rate hike.
Beyond the immediate horizon, the lira is likely to play an increasingly important role over the rate path through to the end of the year. A leading Turkish economist told MNI that a stable lira could allow the CBRT’s next significant monetary policy move to be an interest rate cut later in the year to stimulate growth, while a former Governor said a year-end inflation figure close to 40% may be achievable if policymakers can prevent the lira’s rate of depreciation falling below the rate of inflation.
