More of the same in 2025?
2024 was a good year in Turkey’s financial markets, much more so than we had expected, as attested to by the sharp improvement in several financial indicators, most notably reserves, but not so, in terms of the hoped-for gains on the disinflation front.
2025 will be a testing year in this regard. Will we see material disinflation toward the CBRT’s forecasts, or will inflation prove sticky again and/or bounce back even with a vengeance? Can the CBRT successfully travel the “narrow corridor” between politics and markets throughout 2025, as it lowers interest rates? What is the macro endgame here, more broadly?
These appear to be the key macro questions of this year, the answers to which will be influenced by a vexing political and global backdrop. In politics, the baseline scenario of our politics author, at the moment, is for early elections to take place by the end of the first quarter of next year, at the latest, although an alternative scenario whereby President Erdogan invests two years into constitutional negotiations also fetches nonnegligible odds.
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