CBT maintains a cautious monetary policy stance

The CBT maintained its cautious monetary policy stance and reiterated that "future monetary policy decisions will be conditional on the improvements in the inflation outlook".

"Furthermore, core inflation momentum has continued to accelerate, which is also feeding the deterioration in medium-term inflationexpectations. Overall, risks on the inflation outlook are still skewed to the upside, the volatile nature of food prices warrants caution and the risk of further currency depreciation is not negligible", says Barclays. 

Furthermore, increasing political uncertainty and geopolitical risks have not only led to repricing of the risk premium, but could work against the TRY as well.

"External vulnerabilities leave Turkey exposed to the re-pricing of EM risk and potential reversal of capital flows when the Fed starts lifting rates", added Barclays.