Turkey: Inflation Remains On An Upward Path

Overall, the higher-than-expected change in inflation last month and continuing pricing pressures reflect still strong cost-push factors, sticky services inflation, and elevated inflation expectations. Inflation will likely peak in April though upside risks continue given the likely recovery in demand conditions in certain groups, the impact of rising international commodity prices, the possibility of tax adjustments and still high inflation expectations.

Given this backdrop, the CBT will remain cautious in the near term given not only inflationary pressures, but also concern about the level and composition of reserves, high dollarization and the need to maintain capital flows.

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