WOOD Flash – Turkey macro: CBT heading towards ex-ante positive real rate
Yesterday (26 October), the Monetary Council raised the policy rate by 500bps, to 35%, as broadly expected. The wording in the statement left the door open for further tightening, but still asserted confidence in the inflation outlook, despite the repeated upward surprises. The rise in energy prices and the potential widening of geopolitical tensions present upward pressure on the inflation outlook and are complicating the funding outlook. On the back of this, we believe that the Council is likely to complete the tightening cycle sooner rather than later, to establish a forward-looking positive policy rate, which should help cement credibility, amidst the deteriorating funding environment. Looking ahead, we expect the policy rate to reach 40% by the year-end, where we see it holding flat in 2024E.
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