Having partly restored its inflation-fighting credibility by maintaining an exceptionally tight monetary stance since its decision last September to raise its benchmark rate to a punitive 24%, the TCMB has been under pressure to signal the start of a rate-cutting cycle as the economy slides towards recession. However, while sentiment towards Turkey has improved dramatically, the scale of the erosion of the TCMB’s credibility over the past several years could make a premature rate cut extremely costly.
Inflation is decelerating, the month-on-month CPI rate slowing to 0.2% in February, but the annual rate is still in double digits at 19.7%.
The squeeze on consumption continues, with imports 27.2% down in January year-on-year, after a 28.3% fall in December.
Industrial production, a proxy for GDP, has contracted for four successive months at an accelerating rate (9.8% year-on-year in December).
