The CBRT delivers the expected, road ahead uncertain

TURKEY - Report 21 Sep 2023 by Murat Ucer

The CBRT/MPC raised the policy rate (one-week repo) by another 500 bps to 30%, in line with the market consensus (see chart), which was also the most likely outcome, in our view.

The paragraph on inflation is now amended to include the acknowledgement of worse than expected July-August prints, as well as the risks stemming from higher oil prices and the “ongoing deterioration in inflation expectations” (link here). In an arguably more dovish twist, the statement now says “[t]he Committee evaluated that tax regulations and cost pressures stemming from wages and exchange rates, which have been pushing up inflation, have broadly passed through to prices, and that the underlying trend in monthly inflation is on course to decline”. The latter part – that the underlying trend in monthly inflation is on course to decline -- is a bit too premature a verdict under the circumstances, we think, and somewhat contradicts what is said or risks outlined in the previous sentences.

Now read on...

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