Türkiye inflation and TCMB expectations from Goldman Sachs

US investment bank Goldman Sachs has predicted that inflation in Turkey may decline faster than expected. The bank also shared its TCMB expectations. In the report published by Goldman Sachs’ Central and Eastern Europe, Middle East and Africa economic analysts, it was emphasized that inflation may decline faster than expected, considering the speed at which the Central Bank of the Republic of Turkey (TCMB) is reducing the money supply in the market. The report stated that inflation may decline to 30 percent by the end of the year, compared to the 42.6 percent forecast. When the TCMB’s current communication is examined, the report predicts that the bank will increase its policy rate by 250 basis points to 45 percent this month, while reminding that Goldman Sachs’ previous estimate for the policy rate was 42.5 percent. The report noted that if inflation declines faster than the markets price in, the bank may begin to reduce its policy rate in the middle of the year, and that it may do so without creating pressure on the TL. "Given our view that 'a faster-than-expected decline in inflation would not necessarily entail a large negative output gap', the risk of premature easing of monetary policy is lower than markets are pricing in," the report said.