WOOD Flash – Turkey macro: inflation report presents a solid, relatively hawkish, framework for disinflation

As we anticipated in our weekly, Fatih Karahan, the newly-appointed governor of the CBT, delivering a speech this morning (8 February), presenting the inaugural inflation report of the year. The presentation struck a hawkish tone, emphasising the commitment to anchoring inflationary expectations. The report maintains the 2024E year-end inflation projection at 36%, but acknowledges the possibility of some deviation. Governor Karahan reiterated the Central Bank's dedication to maintaining the current policy interest rate as necessary, while also signalling the preparedness to tighten policy, should the inflation outlook deteriorate. At this stage, we read the statement as advocating for a prolonged wait-and-see approach, but we welcome the idea that the door is open for further hikes, if necessary, and that interest rate cuts are not close currently, as the governor stressed, specifically, that it is too early to talk about it. We note that the balance of payment, in the past two months of data, is showing a healthier position, and we welcome the more cautious stance of the new governor; however, this remains in the context of an overall inadequate economic slowdown to firmly bring inflation down sustainably.