Inflation and the CBRT. February inflation figures will be announced on 3 March. According to surveys, the median estimate for the monthly CPI is 3.0%, which would bring the YoY CPI down to 40.0% from 42.1%. We still see inflation trending downwards, but as the favourable base effects slowly disappear, the monthly volatility of inflation is likely to be higher going forward, risking upward revisions to the year-end inflation forecasts. However, this is unlikely to deter the CBRT from rate cuts in the coming months.
The Turkish economy grew despite the high rate environment in 4Q24. After contracting for two consecutive quarters in mid-2024, the Turkish economy returned to growth in the last quarter of the year. Looking ahead, we think that officials will continue to seek a balance between growth and inflation, rather than concentrate solely on the fight with inflation. As such, we see no reason to change our views on the CBRT’s rate-cutting cycle based solely on the growth data.