We have revised up our USD/TRY forecast path significantly, with a target of 25.00 for end-2023 and 30.00 for end-2024.

Now that the exchange rate has started to depreciate once again, the FX pass-through to inflation will re-accelerate – the apparently falling inflation could begin to reverse.

The outlook for the real interest rate will deteriorate, which will further intensify exchange rate depreciation – this is the familiar inflation-FX spiral – the reason why we have significantly weakened our lira forecasts in the election aftermath.