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MNI CRBT Preview - May 2022: CBRT To Keep Rates Steady Despite TRY Weakness

Executive Summary:

  • The CBRT is expected to leave its 1W repo rate steady at 14% on May 26 despite de-anchoring inflation expectations and renewed TRY weakness.
  • The Ukraine war shock combined with the renewed TRY weakness could delay the ‘disinflation process’ that the CBRT has been referring to in its latest meetings.
  • Recent CBRT survey revealed that the year-end forecast increased to 58% YoY (up from 46% previously), with some sell side analysts forecasting that inflation could surge up to 70%.


Link to full preview:

May 26 CBRT Peview.pdf

The CBRT is expected to leave its 1W repo rate steady at 14% on May 26 despite de-anchoring inflation expectations and renewed TRY weakness. The CRBT has been holding its benchmark rate steady since December last year (following aggressive cuts in the last few months of 2021) in attempt to stimulate the economic activity, which has been dramatically impacted by the Russia/Ukraine conflict.

The left chart shows that headline inflation soared to 70% in April, a 20-year high, with the core index soaring to 52.4%. Recent CBRT survey revealed that the year-end forecast increased to 58% YoY (up from 46% previously), with some sell side analysts forecasting that inflation could surge up to 70%. This week, we saw that the expected inflation in the next 12 months increased to 33.3% in May, up from 28.4% the previous month.

Source: Bloomberg/MNI

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