The sheer pace of annual GDP growth in Turkey in Q3 was flattered by base effects, but a closer look at the data shows worrying signs that strong growth has contributed to the recent jump in inflation and is resulting in a fresh build-up of external vulnerabilities. The central bank looks set to act at Thursday’s MPC meeting and we now expect a 100bp hike in the late liquidity rate (to 13.25%). The MPC is likely to face pressure to reverse course next year, but we think easing will only come in 2019.
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