Turkish MPC underplays inflation and current account concerns

The press release accompanying today’s Turkish MPC meeting, at which interest rates were left unchanged, suggests that policymakers are increasingly concerned about the inflation outlook. But we still think the Council is failing to acknowledge the full extent of the country’s inflation problem and the risks posed by the current account deficit – a particular vulnerability ahead of next month’s parliamentary election. As a result of these, monetary conditions will need to stay extremely tight.