WOOD Flash – Turkey macro: inflation outpaces CBT’s expectations, yet again
In September, Turkey's inflation surged to 61.5% yoy, marking the third consecutive month of surpassing the Central Bank of Turkey's (CBT) forecasts. The CBT has responded by raising the policy rate by a substantial 2,150 basis points since June, now standing at 30%. Despite these efforts, the CBT remains cautious, balancing the need to control inflation with concerns about an excessive economic slowdown. We anticipate the policy rate reaching 35% by the year-end, with the potential for further increases of 500 basis points. Regarding the Turkish Lira's trajectory, we keep our forecast unchanged, but it is worth noting that our fair value model suggests a more aggressive depreciation compared to our previous estimate (40.5 to 44.5 USD/TRY in 2024E eop). This aligns with the forward implied FX rates and the expectations of the Turkish government.
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