(Bloomberg) -- Turkey’s central bank is set to look past a final spurt in inflation to around 75% this month, likely extending an interest-rate pause it...
-- Turkey ’s central bank is set to look past a final spurt in inflation to around 75% this month, likely extending an interest-rate pause it justifies by focusing on more optimistic projections .The highest nominal rates among the Group of 20 nations are finally feeding through to an economy that’s having to contend with one of the fastest levels of inflation in the world. And in a rarity for Turkey , inflation expectations have been declining despite a long unbroken stretch of price acceleration.
“The upcoming CPI releases are likely to be critical,” she said. “If the improving trend seen in April continues, the policymakers can feel more comfortable about keeping interest rates on hold, which we believe is their preference.”“With the policy rate remaining on hold, we expect the central bank to further lean on its alternative tools.
“FX stability is allowing for more risk taking,” Bank of America Corp. economist Zumrut Imamoglu said in a note. “Although macroprudential measures have been very effective on lira loan growth, the central bank might bring new measures to curb FX loan growth and credit card spending if inflation inertia proves stronger than expected in the coming months.”
Other challenges abound. Consumer spending and sticky services inflation remain too strong for the liking of officials. Karahan has said the central bank believes tighter monetary policy — which works with a lag — will help cool off domestic demand into the second half of the year.
Inflation Expectations Central Bank Morgan Stanley Interest-Rate Fatih Karahan Optimistic Projections Turkey UBS Group AG Economists HSBC Holdings Plc
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