A matter of words vs deeds

TURKEY - Report 20 Jul 2023 by Murat Ucer

The CBRT/MPC raised the policy rate (one-week repo rate) by a less than expected 250 bps today (vs. a median forecast of about 500 bps hike) to 17.5% (see chart), but broadly in line with our expectations (of some 200-300 bps hike). Recall that we’ve been working with the assumption of the MPC getting to a terminal rate of 25% -- yet very, very slowly, which is consistent with today’s move. What is worse, of course, is that regardless of the pace, 25% is too low to make much of a difference in terms of reining in inflation, given that it is heading toward a 50-60% range by year end, and is likely to become entrenched at those levels.

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