Inflation in Turkey may decline faster than expected

U.S. investment bank Goldman Sachs has projected that inflation in Turkey could fall faster than anticipated.

According to a report published by Goldman Sachs' Central and Eastern Europe, Middle East, and Africa economic analysts, it was emphasized that considering the speed at which the Central Bank of the Republic of Turkey (CBRT) is reducing the money supply in the market, inflation could decline more rapidly than expected.

The report stated that inflation could drop to around 30 percent by the end of the year, which is lower than the previously projected level of 42.6 percent.

Noting the expectation that the Bank will raise its policy rate to 45 percent this month based on the CBRT's current communication, the report recalled that Goldman Sachs' previous policy rate forecast was 42.5 percent.

The report stated that if inflation falls faster than what the markets have priced in, the Bank could begin cutting the policy rate by mid-year and could do so without creating pressure on the Turkish Lira.

In the report, which takes into account the view that 'inflation falling faster than expectations does not require a large negative output gap,' it was noted that the risk of early easing in monetary policy is lower than market expectations.