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The Central Bank of Turkey kept the policy rate at 19% in line with the expectations. Given the worsened inflation expectations, the CBRT repeated the need to decisively keep the current “tight” monetary policy stance. Thus we expect an easing cycle only very gradually in late 3Q and end the year with 16% policy rate.
Industrial Production grew by 66% YoY in cal. adj. terms in April, boosted by base effects. Despite the 0.9% MoM contraction, the slow down isn't clear, given strong momentum so far and upward revisions in global growth reinforce upside risks for our prudent 2021 GDP growth forecast of 5%.
The consumption growth rates in May were lower across all countries except Mexico due to the Covid-19 impact starting to improve in May 2020.
Consumer prices increased by 0.89% in May, sizably lower than expectations, resulting in an annual inflation of 16.59% (down from 17.14% the month before). We maintain our year-end inflation forecast at 15% and expect the CBRT to start an easing cycle only very gradually in September.
Turkish economy grew by 7.0% in yearly terms in 1Q21 and 1.7% in quarterly terms implying no moderation compared to 4Q20. Current strong momentum, ongoing credit growth and positive global outlook put upside risks on our prudent 2021 growth forecast of 5%.
Industrial Production grew by 16.6% yoy in cal. adj. terms in March, implying 19.9% yoy growth in unadjusted series (11.2% 1Q21 vs. 10.2% in 4Q20). The strong momentum so far, favorable base effects and upward revisions in the global growth outlook reinforces upsides risks on our current 2021 GDP growth forecast of 5%.
The consumption acceleration continued during April across all countries and sectors, reaching its highest peak with respect to last year lockdowns.
The Central Bank of Turkey (CBRT) kept the policy rate (one-week repo) at 19% in line with the expectations. Given the worsened inflation outlook, the CBRT tries to manage by eliminating any early rate cut expectations thus, we expect an easing cycle only very gradually in late 3Q and end the year with 16% policy rate.