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Despite the release of higher-than-expected inflation figures today, the January Monetary Policy Committee (MPC) statement suggests that the Central Bank of Turkey (CBT) may still consider further easing during its March meeting, Citi analysts said.
The bank’s analysts pointed to the CBT’s continued reliance on a Real Effective Exchange Rate (RER)-based disinflation strategy, which they believe will persist.
Citi analysts highlighted several factors that are likely to influence market sentiment in the near future. These include monthly inflation data, economic activity pace, reserve accumulation, and the investment choices of residents.
The analysts also noted the potential impact of policy decisions on the demand for Turkish Lira-denominated assets. Among these decisions, the possibility of a more accommodative policy stance to prevent economic stagnation and another increase in the minimum wage by mid-year were identified as significant considerations.
Looking ahead, Citi has projected the policy rate in Turkey to reach 29% by the end of the year. However, the firm remains aware of the risks associated with the uncertainty of fiscal and income policy support.
The statement from Citi comes at a time when the Turkish economy is under close scrutiny by investors, as the country navigates through complex economic challenges.
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