The rebound in Turkey’s FX reserves, with one key measure (net reserves excluding FX swaps) turning positive for the first time in four years, is a necessary part of the policy shift underway and should put policymakers in a more comfortable position to allow larger currency depreciation going forward. Meanwhile, the Q1 GDP data out of Central Europe this week showed that private consumption drove the recovery and we think this will be sustained over the rest of the year. Finally, the start of the ECB's monetary easing cycle is unlikely to have a major impact on CEE central banks this year, but should increase the window for rate cuts in 2025 if domestic inflation pressures also ease significantly (as we expect).
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