JP Morgan raises Turkey’s year-end inflation forecast

JP Morgan raised its year-end CPI inflation forecast for Turkey to 40.2% after February inflation data. The bank predicted that inflation would peak at 60% in May. In the February inflation rating of the institution, it was written that factors such as exchange rate pass-through, high global commodity prices, bad weather conditions, strong domestic demand, and unorthodox monetary policy were influential in the rise in inflation.

Stating that some of these effects will disappear in the coming months, “If the lira remains stable, the exchange rate pass-through will decrease, but the high course in commodity prices and supply problems may continue. In this environment, we are increasing our inflation forecast for the end of 2022 from 35.7% to 40.2%”.

Expected peak in May

The institution predicted that inflation would peak at 60% in May. It has been stated that the monetary policies of the Central Bank of the Republic of Turkey have diverged with the macroeconomic outlook in the recent period and said, “We do not expect an interest rate increase from the bank until the end of the year. The policy rate may remain at 14% throughout the year,” he said.

It was emphasized that due to the volatility in global financial markets, the crisis in Ukraine and strong domestic price pressures, it is almost impossible to loosen monetary policy.

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