Turkey: Inflation, Exchange Rate’s Pass-Through And Monetary Policy

Despite a huge collapse in activity, the Turkish inflation is still flirting with 20% yoy and the main monetary policy rate is stuck at 24% for 8 months.

Since the beginning of the year, fiscal policy has been used as a tool to support the economy that has just exited recession. However, the fiscal stimulus cannot be extended for long, at least not at this path. In such a context, using monetary policy could be another option to boost economy in the coming months, should the authorities have room to do so. In other words, it is still necessary for inflation to fall sufficiently and for the currency to stabilize, if not appreciate.

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