Uzbekistan GDRs jump on LSE after Fitch vote of confidence in country’s reforms
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Turkey’s consumer price index (CPI) inflation officially edged up to 32.61% y/y in May from 32.37% in April, the Turkish Statistical Institute (TUIK, or TurkStat) said on June 5.
The popular contention across multiple media reports is that the 0.24-pp increase in the headline rate is a reflection of economic impacts of the Iran war.
TUIK also posted a monthly official inflation figure of 1.71% after previously releasing 4.18% for April, 1.94% for March, 2.96% for February and 4.84% for January.
It is not advisable to plan, price or draw inferences based on TUIK data. There is widespread concern about the reliability of Turkey’s official data series.
At 33% y/y, Turkey put Argentina in the rear-view mirror and moved up to fourth place in the world inflation league.
End-2026 expectations moved through 30%
On May 14, Turkey’s central bank raised its end-2026 official inflation “forecast” to 26% in its latest quarterly inflation report from the earlier stated range of 15-21% provided in the previous report released in February.
On August 13, the central bank will release its next quarterly inflation report, the third of 2026. It will include updated forecasts and updates on war impacts.
The central bank also hiked its average Brent oil price forecast for 2026 to $89 from the $60s per barrel provided in the February report.
Based on the central bank’s previous estimates, the authority calculates a headline inflation increase of about 0.8pp per each 10% increase in the Brent oil price.
Stress in the mix
The USD/Turkish lira (TRY) pair remains under control. After the April 8 Iran war ceasefire was declared, portfolio inflows to Turkey resumed. However, strong inflows that would bring the reserve buffers to the pre-war levels have not been observed.
On May 21, domestic political stress was also added to the mix after the main opposition Republican People’s Party (CHP) leader was replaced by his predecessor by a court order.
So far, no big shock or crisis has been produced by the ruling regime's hollowing out of the opposition. Strong inflows are, however, not visible looking ahead.
Next policy rate meeting on June 11
On April 22, the monetary policy committee (MPC) of Turkey’s central bank left its main policy rate (one-week repo) unchanged at 37% in line with expectations.
On June 11, the MPC will hold its fourth rate-setting meeting of the year. Currently, no change to the benchmark is the main expectation.
Depending on developments in portfolio inflows, a shift to tightening with a hike of up to 300 bp could be on the cards.
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