JP Morgan Does Not Expect Policy Changes From CBRT

JP Morgan does not expect policy changes from the CBRT. The bank also interpreted the inflation data.

In a research note published on Turkey’s inflation data, JP Morgan stated that inflation was lower than expected, but this was a temporary factor. Stating that the inflation rate for May will not cause any change in the policy of the Central Bank of the Republic of Turkey (CBRT), the bank said that the cost-based price pressure remains strong and therefore they kept their year-end inflation forecasts at 13.4 percent. Emphasizing that this vertical surprise in inflation was the lower-than-expected increase in clothing prices and the fact that only a part of the increase in gasoline prices was reflected in May, JP Morgan noted that inflation will remain above 16 percent until November. Stating that the weakness in the exchange rate continues to play an important role in the price pressure, JP Morgan economists said that all price increases may not have been reflected due to the closure in May and that the effect of price increases will be seen in June. JP Morgan emphasized that the CBRT's monetary policy flexing earlier than expected will reduce policy credibility, put pressure on the Turkish lira, harm the disinflation process and even have a counter-productive effect on short-term growth.